SOURCE: Bloomberg

Bwin Interactive Entertainment AG, an Austrian online gambling company, said it's in talks to buy U.K. Web bookmaker Sportingbet Plc in a transaction that would add more than 200,000 sports betting customers in Europe.

Discussions are at a ``very preliminary'' stage and ``may or may not lead to an offer,'' the Vienna-based company said in a statement today. Sportingbet earlier today said it received a takeover approach from a suitor it didn't identify.

Bwin approached Sportingbet after a U.S. law passed in September cut Internet gaming operators off from the country, sparking an industry-wide scramble to replace lost revenue. State- run gambling companies in the European Union may find it harder to defend their monopolies after the region's highest court yesterday lifted a barrier used by Italy to keep out foreign competitors.

``We think this news is very positive for the rest of the sector and would expect further online gaming mergers & acquisitions over the coming months,'' Numis Securities analyst Richard Carter said of the Sportingbet talks in a note to clients.

Shares of Sportingbet rose 7.75 pence, or 15 percent, to 59 pence in London, where the company is based. That increased the bookmaker's market value to 255 million pounds ($492 million).

Bwin stock advanced 2.29 euros, or 8.5 percent, to 29.29 euros in Vienna, giving the company a market value of 955 million euros ($1.25 billion). Shares of PartyGaming Plc, the world's biggest Internet poker company, rose 8.4 percent in London, while 888 Holdings Plc gained 5.3 percent.

Sales Increase

PartyGaming in December agreed to purchase gambling Web sites from Empire Online Ltd. and Intercontinental Online Gaming Ltd. Ladbrokes Plc, the world's biggest publicly traded bookmaker, is considering a takeover bid for 888, the second- largest U.K. Web gambling company, to expand in Internet gaming.

``We've always said we're monitoring the market,'' Konrad Sveceny, head of investor relations at Bwin, said by telephone. ``We will continue to do so in the future.''

Numis's Carter said Sportingbet would be ``unlikely and unwilling'' to accept a bid of less than 85 pence a share. The company last week reported a 26 percent gain in sales from non- U.S. activities and forecast a return to profit next year.

Sportingbet had 203,653 sports betting customers in Europe at the end of January and 67,497 casino and gaming customers. The company also has a smaller operation in Australia.

U.S. Crackdown

The Internet bookmaker's market value has fallen from almost 800 million pounds before the U.S. measure's passage. The crackdown forced Sportingbet to sell a unit that took bets from Americans for $1. The company is expanding in countries from Turkey to Italy and cutting costs.

Sportingbet took a one-time, 252.4 million-pound first- quarter charge for exiting the U.S. Bwin had a write-down of almost 500 million euros in the fourth quarter for its Ongame e- solutions AB unit, whose customers were mostly American, and currently only offers play-money games in the U.S.

Before the U.S. law was passed, Bwin's co-Chief Executive Officer Manfred Bodner said in an Aug. 30 interview that Bwin would become the ``market leader'' and be in a position of strength because PartyGaming and Sportingbet would be ``destroyed'' if the legislature was approved.

The European Court of Justice said yesterday that Italian legislation prohibiting publicly traded companies from obtaining gaming licenses restricted ``the freedom to provide services'' in the EU. Italian authorities had threatened to prosecute employees of Stanley Leisure Plc who ran gaming shops.

Bwin was barred last year by several German states including Hesse from taking sports wagers. Organizers of a French bicycle race last month forbade the team sponsored by Unibet Group Plc to wear uniforms that displayed the Web site's address.

Bwin said in November it would scrap its expansion strategy sooner than planned and cut marketing spending by half this year after governments in Europe and the U.S. restricted Web gambling.