The publicly-traded online gaming operator 888 Holdings has acquired a majority stake in the All American Poker Network (AAPN) for a price of $28 million.
On Tuesday, 888 announced it had bought out the remaining 53 percent stake from investment partner Avenue Capital. The goal of the takeover is clear, as 888 looks to strengthen its hold and growth potential in the rapidly expanding online gaming market in the US.
“This acquisition places 888 in an even better position to take advantage of the significant growth opportunities in the US and create additional value for our shareholders,” 888 CEO Itai Frieberger said in a press release announcing the deal.
Stock in 888 was trading up some 6.6 percent on news that the deal had been closed. Analysts are bullish on what the new poker property means for the company.
“We see this transaction as an important step for 888 in taking control of its US strategy, and maximizing the value of a strong platform to target what is a material growth opportunity,” noted investment bank Canaccord Genuity, according to the Financial Times.
Sluggish Start
While optimism reigns for the long-term online poker outlook in the US, recent changes to the industry haven’t exactly been the cash cow that many had hoped for.
On May 1, the online player pools of New Jersey, Delaware, and Nevada were merged into one, allowing players from those states to match wits on the virtual felt.
But so far, it hasn’t added up to a financial windfall for poker operators.
In the first 30 days under the new arrangement, revenues increased only slightly. Months later, the needle has barely moved, as reported revenues continued to fall flat.
Operating under the Caesars and WSOP.com brands, 888 is currently the only poker provider licensed to offer games in all three states.
With a population of 26 million, Pennsylvania is expected to join the player pool and provide a boost to the bottom line when it finally regulates online poker early in 2019.
And it’s doubtful that 888 would spend tens of millions buying out AAPN if it didn’t think that even more states will legalize the game in the near future.
Positioning for Poker Expansion
If that happens, this acquisition puts the company in a good spot to capitalize on a growing market.
AAPN was founded in 2013 as a joint venture between 888 and Avenue Capital. At the time, the expectation was that online poker would quickly rebound from Black Friday, but it didn’t quite work out that way.
Still, Frieberger calls AAPN a “very successful endeavor,” and says gaining full control over the company will give 888 the flexibility “to develop innovative and exciting new partnerships and launch in new states.”
The deal saw 888 pay $10 million for AAPN, up front, with the remaining $18 million to be paid by the end of next March.
