Group Antes Up $700 Million for Producer of Poker on TV
Is this a deal or a bluff?
An investor group headed by two-time World Series of Poker champion Doyle “Texas Dolly” Brunson has made an unsolicited $700-million bid for WPT Enterprises Inc., owner of the “World Poker Tour” television show and online casino, WPT said Friday.
The offer for WPT “does not specify any terms” beyond the price, said W. Todd Steele, chief financial officer of the Los Angeles company. “We assume there are other investors but they are not named.”
WPT’s board is just starting to evaluate the offer, which was received Thursday, he said.
Brunson couldn’t be reached for comment Friday because he was playing in the World Series of Poker at the Rio hotel and casino in Las Vegas, a rival circuit to the World Poker Tour. His representatives at the Las Vegas law firm of Goodman & Chesnoff didn’t return calls.
Although the 71-year-old poker patriarch is well regarded for his acumen at the card table, Wall Street is wondering whether he has the financial wherewithal to pull off an acquisition of WPT.
WPT’s shares shot up $8.75, or 49%, to $26.50 on Friday after the company confirmed that it had a bid in hand. Yet the stock was still well below the roughly $34-a-share valuation of the bid, said Todd Eilers, an analyst with Roth Capital Partners in Newport Beach.
The gap is a result of Brunson not showing his cards, Eilers said. The gambler hasn’t said who his partners are or outlined the source of his funds. Although that may be true to form for a poker player, Eilers said it made Wall Street skittish.
“Brunson may be a poker icon, but it sounds like he is a figurehead here,” Eilers said. “It is not clear how much he is contributing to the purchase price. The real question is who the other financial backers are.”
For investors, World Poker Tour has proved a good bet because poker is hot, whether it is played on a computer, the kitchen table or at a posh Las Vegas resort. The company went public last August at $8 a share.
“I don’t think anybody could have foreseen the popularity of poker,” said Jack Binion, the casino entrepreneur who with his father, Benny Binion, founded the World Series of Poker tournament at the old Horseshoe casino in downtown Las Vegas 35 years ago. “What really made it big is all the television coverage and especially the Internet.”
The Bellagio, the Las Vegas Strip resort where the WPT championship is played each April, just spent $5 million remodeling its poker room and increased the number of tables by a third to 40.
“Our poker business is up by 60% over the past three years,” said Doug Dalton, the casino’s director of poker operations.
All this activity is reflected in the high valuations of Internet gaming stocks, Binion said.
Just last month, Britain’s PartyGaming went public for $8.5 billion in one of the London Stock Exchange’s largest offerings in recent years.
Analysts say that may be why Brunson is making a $700-million bid for WPT, which at this point is a tiny business compared with the giant Las Vegas casinos or Indian gaming halls. WPT earned $752,000 last year on revenue of $17.6 million.
In June, WPT launched its online casino, offering a live multiplayer poker room with head-to-head and tournament play. Although the site prohibits bets from players in the U.S. and other jurisdictions where online gaming is prohibited, it still has significant growth potential, Eilers said.
Worldwide, online gambling will hit $3 billion this year and will grow to $4.5 billion in 2006, Eilers said. Because of legal restrictions, WPT operated in just 20% of the market. But even that slice is large and growing, the analyst noted.
“The WPT television show goes to over 60 international markets,” he said, “And that will drive customers to the online casino.”
Even if Brunson does come up with the funds, it’s not clear whether he will be able to close the deal without the consent of Minnetonka, Minn.-based Lakes Entertainment Inc., a manager of Indian casinos, which owns about 62% of WPT. Lakes said it was reviewing the offer.
