PartyGaming and 888 Holdings, two of the largest online gaming groups, have held preliminary talks about a merger as the industry scrambles to respond to the crackdown on internet gambling in the US.
Talks between the two companies, which have a combined market value of about £1.6bn ($3bn), are believed to be at a very early stage.
Nevertheless, they demonstrate how online gaming companies have been forced to rethink their strategies after the change in US laws caused the sector’s UK-listed shares to collapse this month.
888 said on Monday that it had held “various preliminary discussions with third parties following suspension of its US activities”.
The group’s shares, which have lost more than 40 per cent of their value this year, jumped 12 per cent to 121p in early London trading, valuing the group at about £146m.
Both 888 and PartyGaming have been linked to other potential merger partners in the past few weeks.
Most internet gaming companies are expected to respond to the change in the US law by considering mergers or expanding quickly in continental Europe and Asia.
Both PartyGaming and 888 have in effect ceased trading in the US since the new legislation was introduced, but are differently positioned in the market.
PartyGaming was more exposed to the US poker market, and until recently earned the majority of its revenues from the US. It estimates it will take a $250m charge to exit the US and has axed its interim dividend.
By contrast, 888 has a more developed casino offering, and its share price fall has been less drastic than that of PartyGaming.
It is not thought the two sides have discussed in detail how a merger would work.
However, there has been constant speculation about future deals.
PartyGaming, which in August bought Gamebookers, an online sports betting service, was linked to a £200m takeover of Gamesys, a smaller UK rival.
The deal is thought to have been undermined by the US law change, but PartyGaming executives have continued to talk about further opportunities.
This month 888 also denied it was in talks to buy Ukbetting, a rival.
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