Gaming / Gambling Business

1. April 9, 2014 11:13 am
Bwin.Party appoints former 3i chief Philip
Yea as chairman
By Andy Sharman
Bwin.Party has appointed Philip Yea, the former 3i chief executive, as its new
chairman – bringing in what one analyst described as a “heavy-hitting” executive, as
the online gaming group addresses the challenge of taking on US markets.
Mr Yea, a former Guinness and Diageo finance director, replaces Simon Duffy, who
announced that he was stepping down in a December trading update.
His appointment comes as Bwin.Party is shifting its focus away from unregulated
“grey markets” towards higher value regulated territories – including the US, where
online gambling has been legalised in New Jersey, Nevada and Delaware.
The gaming company also faces the scrutiny of activist investors, after Jason
Ader acquired a 6.1 per cent stake in March, from Ruth Parasol and Russ Deleon,
founders of the group’s PartyGaming entity, for about $100m. Mr Ader took the
stake through an investment vehicle, for his New York hedge fund Cumberland
Associates.
Mr Yea said the London-listed company was at an “interesting stage” in its
development.
“There are some exciting opportunities and challenges for the business as it looks to
leverage its technology, further reduce costs and build shareholder value through
development of its regulated business,” he said.

2. The financial impact of exiting 18 unregulated markets was underlined on
Wednesday as Bwin.Party reported that revenues in the quarter to March 31 had
fallen 8 per cent year on year to €165.7m, and the proportion of sales from regulated
markets had risen by 5 percentage points to 56 per cent of the total.
Gambling via mobile devices represented 17 per cent of total gross revenues, up from
8 per cent in same period a year earlier.
A bet on battle experience
Some years ago, facing an attack squad of MPs, Philip Yea – in his role as head
of 3i – was described, in a concession by one of the politicians, as “the acceptable face
of private equity”. Online gaming group Bwin. Party must be hoping that its new
chairman can pull off a similar trick of presenting its activities in a relatively
favourable light.
Mr Yea’s toughest audience will be investors. Appetite for a spin-off of the group’s US
business has been sharpened by the arrival of activist investor Jason Ader.
Management says such a move will not be contemplated until the group’s US
operations are bigger. In the interim, talk about leveraging its technology and
reducing costs to create shareholder value will have to do.
An expansion in the US could be on the cards, though. Online gaming became
legal in Delaware, New Jersey and Nevada last year, and other states – most notably
California – may relax their laws.
Without such moves, Bwin will struggle to make a definitive break from reliance on
unregulated markets. Sales in these places are declining, but in the three months to
March they were still 44 per cent of the total. Meanwhile, the group must manage the
fall in overall revenues that is the price of making the shift.
Online gaming does not face the fierce public and political hostility that private
equity did back in 2007. Even so, Mr Yea will still need his battle-honed skills.
Managing shareholder expectations that depend significantly on political
developments beyond the group’s control is at least as difficult as coming under fire
at Westminster.

3. James Hollins, an analyst at Investec, said the decline in revenues reflected “tough”
poker and bingo markets, as well as the effects of a block on more than 150 gaming
sites in Greece.
But, quarter on quarter, revenues were up slightly – which Ivor Jones, an analyst at
house broker Numis, said represented “green shoots”. He added that, as Bwin’s
strategy of shifting from “volume to value” was implemented in the first half of last
year, the comparatives would get “considerably easier” as 2014 progressed.
Norbert Teufelberger, Bwin.Party chief executive, said: “The business has continued
to deliver sequential growth since Q3 2013 that we predicted would be the low point
in terms of revenue performance.”
The group highlighted additional annual cost savings of €20m that would be
delivered in 2014, with further savings in 2015.
Shares in Bwin.Party fell 1.3 per cent to 123.3p in afternoon Wednesday trading.
They have fallen more than 6 per cent in a year.
Philip Yea
The new chairman of Bwin.Party Philip Yea was a City golden boy until his
ignominious exit from private equity group 3i in 2009.
Mr Yea’s fall from grace at 3i was quick. Just a year after being named the most
influential person in private equity in a poll by Financial News, Mr Yea quit the
private equity group amid cash flow problems, high leverage and a 70 per cent drop
in its share price in less than six months.
His exit was a low point in an otherwise successful career in the City. Mr Yea spent
six years as finance director at Guinness, during which it merged with Grand
Metropolitan – a deal in which he was “closely involved”.
After Diageo, he spent five years at Investcorp, where he was a managing director.
During this time, Mr Yea picked up a host of non-executive directorships at Halifax
and HBOS in the early noughties, before the bank had to be rescued by Lloyds at the
height of the financial crisis, as well as Manchester United.
Mr Yea joined 3i as chief executive in 2005. At the private equity group, Mr Yea’s
management style was described in one profile as “more schoolmaster than master of
the universe”.

4. The 59-year old is still well-connected and well-respected in the City, and beyond. As
well as a host of board positions – he remains a non-executive director at Vodafone –
Mr Yea also advises Prince Andrew, the Duke of York, on his role as a UK trade
envoy.