Holding(s) in Company
Livermore Investmens Press Release 2006 / Settlement of Litigation
Print Current Text  Close

14 February 2006

Empire Online Limited
Settlement of Litigation



Proposed settlement of litigation                            with PartyGaming Plc (“PartyGaming”)                            and assignment of related “skin” activities                            subject to Shareholder approval








    Settlement of litigation with                            PartyGaming  


    Assignment of Empire Online’s                            PartyGaming related “skin” operations                            to PartyGaming 


    $250 million cash payment 


    Company reaffirms expectation                            that its continuing businesses will contribute $37                            million of net profit in the year ended 31                            December 2006. 


    Proposals conditional upon shareholder                            approval – voting authorities in favour of                            the proposals have been obtained from shareholders                            holding in aggregate 56.0% of the ordinary shares                            in the Company




Noam Lanir, Chief Executive of Empire                          Online, said today:




“This transaction removes the                          uncertainty of litigation between Empire Online and                          PartyGaming. It puts the Company on a stronger footing                          and will enable management to focus on growing its                          continuing businesses. We will consider carefully how                          to use the net proceeds from this sale to the maximum                          benefit of shareholders.”








Empire                                  Online Limited

+357                                  (2) 5 847 700

Noam                                  Lanir, Chief Executive Officer


Andrew                                  Burnett




Numis                                  Securities Limited

+44                                  (0) 207 776 1500

Jag                                  Mundi, Head of Corporate Finance


Lee                                  Aston, Director, Corporate Finance




Citigate                                  Dewe Rogerson

+44                                  (0) 20 7638 9571

Simon                                  Rigby


Sarah                                  Gestetner








Proposed settlement of                              litigation with PartyGaming and assignment of related “skin”   activities                              subject to Shareholder approval








The Company announces that it has                          today entered into an agreement with PartyGaming to                          settle all outstanding litigation between them and                          effectively to sell the business and assets of its                          PartyGaming “skin” activities (i.e. operations                          designed to direct players to one of PartyGaming’s                          gaming platforms) to PartyGaming in return for a cash                          payment of US$250 million, payable on completion.




Under the terms of this agreement                          the existing contractual arrangements with PartyGaming                          will be terminated and Empire Online will assign to                          PartyGaming its interests in certain domain names related                          to the PartyGaming “skin” activities including “empirepoker.com” and “aceclub.com”.




The agreement is conditional upon                          the approval of Empire Online shareholders by way of                          an ordinary resolution.




There is no requirement either under                          BVI law or under the AIM Rules to obtain shareholder                          approval for a disposal of this size, but the Directors                          consider that, given the significance of the transaction                          and settlement and for the sake of good governance                          and practice, shareholders should be appraised of the                          Proposals and be given the opportunity to vote on the                          Proposals.




Background to the Proposals




Empire Online had a close working                          relationship with PartyGaming from 2002, when it commenced                          marketing PartyGaming’s online casino brands.  In                          2003, Empire Poker was launched under a white label                          or “skin” agreement with PartyGaming and                          over time became PartyGaming’s most important                          poker skin, providing approximately 70 per cent. of                          all players provided under its skin agreements.




Following the acquisition of ClubDice                          and Noble Poker in August 2005, an increasing proportion                          of new player sign ups and revenue has been derived                          from activities not related to PartyGaming and the                          Directors confirm that in the year ended 31 December                          2006 such activities should contribute approximately                          $37m of net profit.




Activities related to PartyGaming                          have remained a source of revenue for Empire Online                          although revenues have declined materially following                          the launch by PartyGaming of a new operating platform                          on 8 October 2005 which                          moved PartyGaming poker players to a different platform                          from that of PartyGaming’s skins.




Following the launch of this new                          platform, Empire Online was approached by PartyGaming                          in relation to an offer by PartyGaming for the entire                          issued and to be issued share capital of Empire Online.                          Following a breakdown of these talks, Empire Online                          announced that the Directors intended to institute                          and vigorously pursue legal proceedings against PartyGaming                          in relation to the launch of PartyGaming’s new                          platform.




During this process, the directors                          of PartyGaming and the Directors entered into mediation,                          from which the Proposals described below have resulted.




The Proposals




The principal terms of the Proposals                          are as follows:




    Both sides to terminate the various “skin” agreements                            between them.                       


    Empire Online to assign to PartyGaming                            all rights, title and interest in certain domain                            names and trade marks associated with those “skin” agreements                            (e.g. empirepoker.com and aceclub.com).                       


    All litigation and other related                            proceedings brought by the Company against PartyGaming                            are to be stayed and all claims waived.                       


    PartyGaming to pay to Empire Online                            $250 million in cash on completion in consideration                            for the settlement of the litigation and the assignment                            of these assets.                       


    PartyGaming also to pay outstanding                            commissions owing to the Group under the relevant “skin”   agreements.




This agreement is subject to approval                          of Empire Online Shareholders at a Shareholders’ meeting.  It                          is not subject to any other conditions. From execution                          of the Sale Agreement, it has been agreed that PartyGaming                          shall effectively operate these skin agreements on                          behalf of the Group pending completion of the transaction.  Any                          commissions earned during the period shall be for PartyGaming’s                          account when completion occurs.




Assets included in the Disposal are                          the domain names empirepoker.com and aceclub.com, and                          the brand names   “Empire Poker” and “Ace                          Club”. These brand names and domain names are                          used by Empire Online to direct online poker and casino                          players to PartyGaming’s websites, creating net                          gaming revenue for the Company.




In the year ended 31                          December 2005, the gross                          profit before administrative expenses attributable                          to the assets being sold was approximately $38.7 million.                          In the quarter ended 31 December                          2005 the assets contributed                          gross profit before administrative expenses of $5.0                          million. The balance sheet value of the net assets                          pursuant to the Proposals was less than $0.1 million                          as at 31 December 2005.




Rationale for the Proposals




The Directors believe that approval                          of the Proposals will crystallise the value of the                          assets being assigned for Shareholders whilst also                          removing the uncertainty of litigation between Empire                          Online and PartyGaming. The Empire Online Board considers                          that, whilst it has always been confident of a successful                          outcome, the litigation process was likely to have                          been protracted. The Proposals will, in the view of                          the Directors, put the Company on a stronger footing                          and also enable management to focus on growing the                          continuing business, and to make suitable acquisitions                          should such opportunities occur.




Principal brand/domain names continuing                          with the Group include Noble Poker, Club Dice Casino,                          Monaco Gold Casino, Carnival Casino, YouBingo, 888casino.com                          and 65.com.




Use of Proceeds




The Directors will consider the most                          appropriate ways in which to use the net proceeds of                          the US$250 million generated through the Proposals                          to maximise value for Shareholders. Options available                          to the Directors include distributions to Shareholders                          as well as potential complementary acquisitions. Assuming                          completion of the Disposal, the Directors will inform                          Shareholders of any decision or proposal in relation                          to use of these proceeds as and when appropriate.




Extraordinary General Meeting




An EGM to approve the Proposals will                          be convened, and notice of this meeting will be set                          out in a circular expected to be posted to shareholders,                          later today.




The resolution to approve the Proposals                          will be an ordinary resolution, which means that it                          will require a simple majority of those persons who,                          being eligible to do so, vote (in person or by proxy)                          at the EGM in favour of the resolution.




Authorities to vote in favour                            of the Proposals




Shareholders (including Directors)                          have given authorities to PartyGaming to vote in favour                          of the Proposals in respect of, in aggregate, 163,999,358                          Ordinary Shares, representing approximately 56.0 per                          cent. of the issued share capital of the Company. 








The Directors believe that                            the Proposals are in the best interests of Shareholders                            as a whole and unanimously recommend that Shareholders                            vote in favour of the Proposals at the EGM, as those                            Directors who hold Ordinary Shares (either directly                            or through depositary interests) intend to do in                            respect of their own beneficial holdings which amount,                            in aggregate, to 62,971,837 Ordinary                            Shares, representing approximately 21.5 per                            cent. of the issued share capital of the Company.











In this announcement expressions have the following                        meanings unless the context requires otherwise:




"AIM"                                                 the                        AIM market operated by the London Stock Exchange plc




"AIM Rules"                                      the                        rules of AIM companies and their directors, nominated                        advisers and brokers contained in the document entitled                        the "AIM Rules" published by the London Stock Exchange                        plc




"BVI"                                                  the                        British Virgin Islands




"Company" or "Empire Online"            Empire                        Online Limited, a company incorporated in the BVI with                        registered number 475668




"Directors" or the "Board"                   the                        directors of Empire Online




"Disposal"                                          the                        proposed assignment of certain assets currently owned                        by the Group pursuant to the Sale Agreement




"EGM" or "Extraordinary General        the                        Extraordinary General Meeting of the Company to be


Meeting"                                            held                        on 6 March 2006, convened to approve the Proposals




"Group"                                               Empire                        Online and its subsidiaries and subsidiary undertakings




"Ordinary Shares" or "Shares"             ordinary                        shares in the share capital of the Company, each having                        no par value




“PartyGaming”                                  PartyGaming                        Plc, a company incorporated in Gibraltar with registered                        number 91225 including, where appropriate, its subsidiaries




"Proposals"                                        together                        the proposed assignment of certain of the Group's assets                        to, and the termination of the skin agreements with,                        PartyGaming pursuant to the Sale Agreement and the settlement                        of the litigation with PartyGaming




"Sale Agreement"                               the                        conditional agreement dated 14 February 2006 between                        (1) WPC Productions Limited (2) PartyGaming (3) Electraworks                        Limited and (4) the Company




"Shareholders"                                                        holders                        of Ordinary Shares or (where the context permits) depositary                        interests representing Ordinary Shares