11-June-2010

Wednesday, Danish national lottery Danske Spil announced Denmark’s Complaints Board for Public Procurement ruled against a deal between the state-sponsored gambling company and PartyGaming PLC. The board’s ruling was in response to a complaint gambling software programmer Playtech lodged in February.

The deal, announced in January, would have made PartyGaming the sole provider of online gambling and poker games platforms for new Danske Spil subsidiaries for five years. According to a press release, the complaints board ruled against the agreement because the national lottery had not put the contract up for tender.

Though PartyGaming and Danske Spil had yet to finalize the terms of the agreement as late as last week, in a January press release PartyGaming CEO Jim Ryan called the deal a “landmark for PartyGaming.”

At the time, Ryan also said, “(The deal) validates our strategy to become a leading provider of B2B services to both corporates and governments around the world. Danske Spil is widely recognised as one of Europe’s leading gambling businesses, one that is pre-eminent in the Danish market.”

The first indication that the deal was in trouble came in February when Danish online business magazine Business.dk reported on Playtech’s complaint. However, PartyGaming and Danske Spil remained silent concerning the issue, declining to speak with gambling news source InfoPowa as recently as last week.

According to the complaints board, the main problem with deal was Danske Spil’s treatment of the contracting process. The national lottery claimed because it initiated negotiations before its subsidiaries existed the contract was not subject to Denmark’s Public Procurement Directive. The board found there was insufficient support for this opinion.

In response to the ruling, Danske Spil Chief Executive Officer H.C. Madsen said, “We have not in any way tried to bypass the rules.

“Since the contract was supposed to be entered by a newly formed subsidiary, which was supposed to compete on a partially liberalised gambling market, we assumed that we were not obliged to perform a tender process as such, but chose a quicker and more flexible tender-like process instead.

“In the tender material forwarded to four participating companies, including Playtech Limited, it was specifically stated that the contract party would be a subsidiary of Danske Spil and that the contract would be entered provided that the market for online casino and poker was liberalised and that Danske Spil was allowed to establish a subsidiary.

“The incorporation of these terms in the tender material should make it clear for the tenderers that Danske Spil acted on behalf of the future subsidiary and that the contract with the subsidiary could only be entered provided that the draft legislation was adopted.”

After news of the ruling, shares in PartyGaming (LON:PRTY) shed 0.60 points to end trading at 255 pounds per share Thursday.

By: Phill Provance
phill.provance@acehoyle.com

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