Empire Online sues PartyGaming after merger talks fail

Empire Online, the internet gaming website founded by Noam Lanir, is suing PartyGaming over its decision to terminate a contract that allowed both groups' poker players to bet against each other.

The lawsuit capped the deteriorating relationship between the poker rivals, which culminated yesterday in the termination of takeover talks after PartyGaming slashed the price it was prepared to offer to 60p per share. The original all-share offer valued Empire Online at 10 per cent of an enlarged group, worth about 140p per share.

It is the second time in two months that Empire Online has been left on the shelf after SportingBet's brief flirtation with the company. Empire said the revised proposal from PartyGaming was "significantly different both in terms of price and structure" and could not be recommended at the new, lower level. Shares in Empire, which rose 5.5p to 69p, have collapsed since the company listed on AIM in June at 175p.

The group, which is known as a "skin" in industry parlance because its empirepoker.com site wraps itself around its rival's technology, is furious that in October PartyGaming moved overnight to end an agreement that had enabled Empire's poker players to bet against those registered with PartyGaming.

Andrew Burnett, its head of mergers and acquisitions, said Empire would "vigorously" pursue the litigation. In a statement, the company said the lawsuit was based on "the damage caused to it by the conduct of companies within the PartyGaming group in separating the poker system used by PartyGaming players from that of its skins".

PartyGaming's decision to create one gaming platform for all its websites hit Empire hard, prompting the "skin" to warn that next year's profits would be at least one-third lower than analysts had pencilled in. PartyGaming said Empire was "clutching at straws", insisting that it was "highly confident" of victory should the case come to court.

The poker giant, which has had its own problems since it floated earlier this year, has been shaking up its relationship with all of its four skins and has already bought out two of them. Another, Coral Eurobet, owned by the casino group Gala, came to its own conclusion that it had no future after Party's move.

Any case against Party will have to be heard in the courts of the British Virgin Islands and any ruling enforced in Gibraltar, where it is based.