THE former boss of e-gaming operator Sportingbet is to float the multi-branded online bingo business Stride Gaming on the Alternative Investment Market today to assemble a warchest for acquisitions and organic growth.
Nigel Payne, who is now non-executive chairman of Stride Gaming, said the flotation aims to raise about £10 million of new money and is also aimed at developing “an institutional [investor] following to further assist its acquisition strategy”.
Payne said: “We feel this is an opportune moment for a scale bingo-led operator to come to Aim to capitalise on the opportunities afforded by regulatory changes, which is forcing consolidation in the industry, to grow organically and through acquisition.
“Our business is profitable, established and run by a highly experienced and proven management team. Today’s news marks an important step in our aim to become the market leader in online bingo.”
The firm said that among regulatory changes making it difficult for a fragmented online bingo industry to survive was the point of consumption tax introduced by the UK government last December.
This levies an extra 15 per cent tax on UK-facing gaming businesses, and has led to many smaller operators closing down.
Stride Gaming added that one of its main advantages was a “multi-branded offering with clear differentiation between each brand to target different categories of players”.
The company’s online bingo brands includes Kitty Bingo, Lucky Pants Bingo, Bingo Extra, Jackpot Liner and King Jackpot, together with the online casino brands Spin and Win and Magical Vegas.
Stride Gaming said that its net gaming revenue had jumped 40 per cent between the first quarter and final quarter of 2014, a period in which it also bought Table Top Entertainment, which included the Jackpot Cafe, Jackpot Liner and King Jackpot brands.
The company said it believed one of its key advantages was that it owned its own online proprietary software “which ensures the group can improve the gaming experience without needing to rely on third party software providers”.
In addition, it only focuses on regulated markets, primarily the UK, where the time and cost of getting gaming licences gives it higher barriers to entry for potential rivals.
In today’s flotation announcement, the group said that the UK online gaming market is estimated to add £1.6 billion of net gaming revenue by 2016, with bingo-led online gaming estimated to account for just under a third of that market.
The directors said: “With the implementation of the POC tax in the UK, and the general increase in regulation, the directors believe that a number of smaller-scale online bingo operators will suffer a significant impact to their margins from the POC tax that will make it difficult for them to continue operating.”
The directors added that they believed acquisition opportunities would be created because “many of the larger online gambling operators view their online bingo operations as non-core to their broader offering and, therefore, with the impact of the POC tax and the need to maximise marketing spend returns, will be less focused on their online bingo offering.”
Dealings are expected to begin on Aim on 19 May. Cantor Fitzgerald Europe is acting as nominated adviser and broker to the company.