Group bids for poker business

Champion player Brunson heads investors seeking WPT Enterprises Inc.

July 09, 2005|By Jerry Hirsch | Jerry Hirsch,LOS ANGELES TIMES

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 yesterday.

The offer for WPT "does not specify any terms" beyond the price, said W. Todd Steele, chief financial officer of the West Hollywood 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 could not be reached for comment yesterday because he was playing in the World Series of Poker in Las Vegas. His Las Vegas law firm of Goodman & Chesnoff did not return calls.

Although the 71-year-old poker patriarch is well regarded for his acumen at the card table, Wall Street is wondering if he has the financial wherewithal to pull off an acquisition of WPT.

WPT's shares shot up $8.75, or 49 percent, to close at $26.50 after the company confirmed yesterday that it had a bid in hand. Yet the stock was well below the roughly $34-a-share valuation of the bid, said Todd Eilers, an analyst with Roth Capital Partners in Newport Beach, Calif.

The gap is a result of Brunson's not showing his cards, Eilers said. The gambler hasn't said who his partners are or outlined the source of his money. While that might be true to form for a poker player, Eilers said, it makes Wall Street skittish.

"It is not clear how much he is contributing to the purchase price," Eilers said. "The real question is who the other financial backers are."

For investors, the World Poker Tour has proved a good bet because poker is hot, whether it is played on a computer, at the kitchen table or in a posh 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."

"Our poker business is up by 60 percent over the past three years," said Doug Dalton, director of poker operations at The Bellagio, the Las Vegas strip resort where the WPT championship is played each April.

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 said that might 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. Though the site prohibits bets from players in the United States and other jurisdictions where online gaming is prohibited, it 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.

"The WPT television show goes to over 60 international markets," he said. "And that will drive customers to the online casino."

Even if Brunson comes up with the money, 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 percent of WPT. Lakes said it is reviewing the offer.

The Los Angeles Times is a Tribune Publishing newspaper.

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