Sportingbet in takeover talks with Bwin

Shares in Sportingbet surged yesterday after the company confirmed it was in takeover talks with the Austrian online bookmaker Bwin.

Sporting was forced to issue a statement confirming the talks by the Takeover Panel after deal rumours swept the market and sparked a sharp rise in the company's share price.

It initially did not name the suitor, but Bwin later issued a statement of its own confirming its interest. The discussions are in their early stages but that did not stop Sporting's shares finishing up 7.75p at 59p, valuing the company at £255m. Bwin's shares also rose in Austria on the back of the news.

However, analysts said there were significant barriers in the way of a deal going through. Bwin has faced legal difficulties with a number of European countries and its top two executives were arrested last year in France after its announcement of a sponsorship deal with the French football team Monaco.

The gambling sector was given a lift on Tuesday after a European court ruled that Italian attempts to shut down Stanleybet International's operations in the country were illegal because while it did not have an Italian licence it did have a UK licence.

A deal with Sportingbet would bring its UK licence to Bwin and help it fight efforts by several European countries to halt its activities. But unlike Sportingbet, the company has never accepted bets from the US and legacy issues hailing from Sportingbet's former US business could yet scupper the process.

Paul Leyland, an analyst with Arbuthnot Securities, said he would be "cautious on pricing in a significant bid premium" into Sporting's shares.