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Back in 2002, WPT Enterprises (NASDAQ: WPTE) revolutionized the gambling business. That is, the firm created the highly popular World Poker Tour television show. In fact, by the middle of 2005, WPT's stock hit $26.50.
Unfortunately, things haven't been so rosy since then. Today, PartyGaming PLC -- a major online gambling operator in the U.K. -- agreed to buy WPT at a paltry $12.3 million. On the news of the deal, the shares of WPT are up 3% to $1.08 per share.
Interestingly enough, there was another deal on the table. Several weeks ago, an investment group -- called Gamynia Ltd. -- was prepared to buy WPT for roughly $9.1 million (with some revenue participation).
However, by combining with PartyGaming, there will be some clear synergies (allowing for a higher valuation). Yet, the company will need to roll-up its sleeves. After all, WPT has been a big money loser over the years. Simply put, the World Poker Tour looks like a classic fad.
OK, so why buy it? One key is that the brand is recognized across the world. Plus, there is still a valuable TV library. And, of course, there are ongoing revenues from future tournaments.
So, in light of these assets, the price tag certainly looks reasonable.
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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