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Sportingbet Jumps Ship

by Glen Shapiro, LawAndTax-News.com, New York

16 October 2006


In the wake of the Congressional passage of the US Unlawful Internet Gambling Enforcement Act earlier this month, gaming firm Sportingbet announced last week that it has sold its US-facing sports betting and casino business to Jazette Enterprises Limited for $1.

Sportsbook.com, the US operation, will now operate from offices in Dublin, Antigua, Vancouver and Costa Rica.

In a statement, the firm announced that:

"Sportingbet received cash consideration of US$1 for the shares and related assets of the US Operations, and has discharged excess liabilities amounting to approximately US$13.2 million. Had the business been closed, the Board estimated that the cost of severance and closure would have amounted to approximately US$14.0 million – a total saving of circa US$27.2 million."

It continued:

"The US Operations employed over 500 people and the Board understands that JEL intends to preserve the operational structure to all material extent. Under the terms of the Disposal, Sportingbet will retain the URLs and intellectual property of wallstreet.com, aces.com and sportingbetUSA.com though these will not be used for any US gaming purpose."

"In addition, JEL has agreed, for a period of two years, not to take bets from non-US residents and for a period of three years, not to take bets from customers outside the Americas region. Further, Sportingbet has retained the details of all non-US resident customers currently registered with the US Operations. Sportingbet will attempt to migrate those customers to its ongoing European business."

Sportingbet went on to announce that it will retain its Paradise Poker business, but from Friday has ceased taking deposits from US resident customers.

The firm announced that:

"To allow for an orderly wind down of the US Paradise business, Paradise Poker will remain open for US customers for real money poker play utilising their existing account balances for one month. At the end of the month long period, US residents will be prevented from playing real money poker at Paradise."

"In addition, the Board has taken immediate steps to prevent customers from ten US States where there is law prohibiting internet gambling from playing real money poker at Paradise Poker."

According to Sportingbet:

"The Group will now focus on further development of its European and Australian businesses. The Australian business, now with a greater focus on the retail customer, is generating more stable margins and therefore profitability."

It concluded:

"The actions taken as a result of the passing of the Act are expected to create a significant exceptional item in the financial year ending 31 July 2007 due to the write down of goodwill and the costs of restructuring. It is the Board’s intention to quantify these before announcing its first quarter results on 29 November 2006."

Commenting on the disposal, Andrew McIver, Chief Executive designate, announced that:

"We are saddened to have to dispose of such a fantastic business as a result of political actions in the US Congress. The sale however, prevents significant closure costs which would have been both expensive and time consuming. It also preserves the employment of those of our colleagues who have worked so hard to build the US operations into the highly profitable business it is today."

A comprehensive report in our Intelligence Report series examining offshore e-commerce and online gaming is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp


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