Sportingbet, the online gambling group, has ended takeover talks after solving an impending cash crunch by revising the terms of a big acquisition that it made in 2001.
The company said yesterday it had managed to persuade the founders of the US business Sportsbook to slash the amount of money it owed to them based on "earnout" clauses to £70m, from more than £100m. The money was due to be paid this September, rather than over the seven years originally agreed, because Sportsbook's performance exceeded expectations.
Nigel Payne, Sportingbet's chief executive, said the group had rebuffed a 30p-per-share approach made last month. The £46m takeover approach emerged out of rescue funding talks with potential new backers, needed to pay for the £103m cash-and-shares payments to the Sportsbook team. Mr Payne said the potential acquirer and Sportsbook had failed to agree on a deal, which would have been conditional on agreeing less onerous terms with the US group. "They couldn't get their mutual requirements in sync," he added. Sportingbet shares fell 1.5p to 24p.
When Sportingbet acquired Sportsbook two years ago for £36m, it agreed an "earnout" clause that would have required the UK company to pay up to £93.7m if the US group reached certain profit targets over the following seven years.
The new proposed £70.1m settlement will include an initial cash payment of $30m due this September, a further $35m cash sum payable "over time" and an increased stake in the company to give Sportsbook a 19.9 per cent total shareholding in Sportingbet. This was reduced from 29.9 per cent under the original terms.
The company said it had agreed new banking facilities with Barclays - a £10m revolving loan facility repayable by 2005 and an extension of its £10.5m overdraft facility - to enable it to make the first payment.
Mr Payne saidSportingbet's could "get on and move for delayed full-year results would be issued next week.Reuse content