PartyGaming in £40m award to executives

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The Independent Online

The online gaming company PartyGaming is awarding its key executives £40m in cash bonuses and share options and ditching performance targets despite its plummeting share price.

Under new incentive arrangements, the chief executive, Mitch Garber, is in line for a package worth £18.5m while the finance director, Martin Weigold, will get just under £6m. Other key employees will be awarded a further £16m in share options.

PartyGaming, the world's biggest internet poker company, has defended the decision, which comes after the shares slumped 60 per cent in the wake of the US crackdown on internet gambling. It said it was necessary to "partially mitigate the loss of the value on existing awards". At the time the company was floated in June 2005, Mr Garber's award package was worth £40m.

The chairman, Michael Jackson, said: "While the passing of the Unlawful Internet Gambling Enforcement Act changed the business environment, the online gaming sector has remained no less competitive both commercially and in terms of attracting and retaining talented individuals.

"The support and generosity of founder shareholders has enabled us to partly mitigate the financial impact on employee incentive arrangements that resulted from the legislative changes in the US."

Shareholder-return performance targets have been scrapped for Mr Garber's options to £20m shares. In addition, he will be paid £3m in cash in 30 equal instalments until 1 May 2009 and will receive a minimum cash bonus of £2m next year. He has also been granted a new option of more than 15 million shares. To help fund the new arrangements, the founders of PartyGaming have donated 40 million shares to the trust that pays out the shares under the incentive scheme.

The move came as the company announced it has taken over a string of online gambling sites, including Noble Poker and Club Dice casino from two smaller rival firms - Empire Online and Intercontinental Online Gaming. PartyGaming is funding the acquisition by issuing 115.2 million new shares or around £36.6m at the current price. None of the acquired sites trade with customers in the United States. PartyGaming said it expected its new acquisitions to be earnings enhancing in 2007. Its shares slipped 1 per cent, or 0.25p, to 31.75p yesterday.