PartyGaming in advanced talks to buy Empire Online assets

Analysts said the deal could be worth about $40 million (20.4m), and would probably include Empire's Noble Poker and Club Dice casino websites.

Shares in PartyGaming rose 7.6 per cent to 32p on the news.

The company has been refocusing its business after it pulled out of the United States market in the wake of legislation there that effectively outlawed internet gambling and sent shares in the sector tumbling. PartyGaming previously made 75 per cent of its earnings in the US.

Empire, which as been looking to distance itself from online gaming since the new law was introduced, said it planned to become an investment company after selling off its internet gambling assets. The firm's online casino generated revenues of $30.2m in the first six months of 2006, while its poker site made $8m.

The online gaming industry is braced for a wave of consolidation as operators battle to overcome the loss of income from the key US market. 888 Holdings has already said that it is in talks with other firms over a possible deal.

In a statement to the stock market, Empire said: "The proceeds of any disposal would be used together with the company's existing cash of approximately 127m to invest opportunistically in both private and public businesses and across the small, mid and large-cap range of companies."

Both PartyGaming and Empire said talks were at an advanced stage and further announcements would be made "when appropriate".

The pair have worked as partners previously but in December last year PartyGaming ring-fenced its own poker players from those of other companies including Empire.