888.com founders to net £175m

A London listing for the company behind the 888.com poker websitewill net at least £175m in cash for its founders and management in a float valuing the business at at least £700m.

The two Israeli families behind the company, led by Aharon Shaked and Shay Ben-Yitzhak, own more than 90 per cent of it, with the rest held by management. The listing, handled by HSBC, will see at least 25 per cent of the shares freely floated. Analysts said initial market estimates of a valuation of £700m may prove conservative.

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888 Holdings announced its intention to list yesterday but a price range has not yet been put on the shares. The company will begin a roadshow for investors next week. As well as providing a partial exit for the founders, 888 said it was looking to use the funds from the listing for acquisitions.

For the first six months of this year, 888 had gaming revenue of $123.7m (£68m) with pre-tax profits of $24.5m. Its Gibraltar base means it pays virtually no tax.

It is understood that 888 had waited to see the reaction to the listing by PartyGaming before deciding to go ahead. Despite negative comment surrounding the legal position of online gambling, the PartyGaming offer this year got a good reception. Valued at £4.6bn on listing, PartyGaming, the global No 1 for online poker, is now worth £6.3bn and will join the FTSE 100 next week.

888 is the leader for online casino gaming, with between 40 and 50 per cent of the world market, and it is the fourth biggest for internet poker. Its sites, which include 888.com and Casino-on-Net, have 20 million registered users.

John Anderson, the chief executive of 888, said: "This is no flash in the pan. This market is set for explosive growth." He said it was a "fallacy" to suggest there were low barriers of entry to the market.

Odds stacked against US gaming sites

According to the US Department of Justice and most lawyers, online gambling is illegal in the US.

But 888 derives more than half its revenues from the US, as does its rival PartyGaming, which listed in London this year. These companies are relying on ambiguities in the law and the fact that the US authorities have not moved against any of the operators so far.

Shay Ben-Yitzhak, a founder and executive director of 888, said he and other management moved freely in and out of the US. However, that may place them in peril.

Chuck Humphrey, a lawyer based in Colorado, said: "Online gambling in the US is illegal. It's as simple as that ... I have no doubt that something will be done about it."

He suggested that if the Department of Justice did not make a move against the business, Eliot Spitzer, the New York attorney general, may have a try.

According to the Department of Justice, online gambling breaches three federal acts including the Wire Act, which dates from the early 1960s and prohibits the placing of bets on "sports" over phone lines. However, a federal court case against MasterCard for financing internet gambling was unsuccessful.