Cash woe may spark bid for Sportingbet

Sportingbet, the online gambling group, admitted yesterday that it might be taken over as it struggles to fund a big acquisition it made in 2001.

The company said it is trying to find new sources of funding and one of the parties to whom it has been talking to could make an offer.

However, Sportingbet shares plunged 6p to 30p because it warned that any offer for the company could be pitched at below the current share price.

The group faces an uphill struggle to fund the payment of an "earn-out". As part of its acquisition of the US online bookie Sportsbook in 2001, it promised up to £103m in cash and shares to the vendors if profits hit certain targets.

The exceptional performance of the business since then means all this becomes due in September this year leaving Sportingbet's finances stretched and its shareholders facing massive dilution. Keith Payne, chief executive, said the cash liability to Sportsbook's founders was "about £20m" although some analysts thought it could be higher.

Mr Payne said Sportingbet's bankers had agreed a £20m overdraft but the group was exploring other ways of raising the funds.

The share price had spiked higher on market speculation of a management buy-out, which Mr Payne described as "a false rumour". There was speculation yesterday that the Sportsbook founders may use the cash they are owed to fund a bid for Sportingbet, particularly since the share proportion of their earn-out would leave them with sizeable holdings.

Mr Payne said: "The shares have gone up 100 per cent in 10 days. Ten days ago I may have said the offer could come at a significant premium to the share price."