Bwin.party considering 110p takeover by AIM's GVC Holdings

"The board has considered the GVC proposal, the potential benefits of which it believes can accrue to bwin.party shareholders from a combination of the two companies and the commitment shown to resolving a number of transaction-related issues, and has determined to work with GVC so that they can finalise their offer over the coming days," the FTSE 250 company said.

The bid, which would value the company at around 12.6 forecast operating profits, was reportedly being backed by Canadian gaming group Amaya and if successful would see GVC launch a share placement to help fund it, according to reports on Wednesday.

In a separate statement, Bwin said trading in the first half of the financial year was in line with expectations, with gaming revenues coming in at €149.1m and turnover on the sports betting side ahead of budget, although gross win margins were below normalised levels.

Cost savings and asset disposals are in line with previous guidance.

"The key remaining question now is whether this news will prompt any rival bids from other parties like 888 or Amaya,” said broker Davy.

Based on GVC's trading statement, the business appears likely to remain on track to deliver EBITDA of close to €100m this year, the Dublin firm added.

Panmure Gordon's Karl Burns said he believed the combination of Bwin and GVC would be likely to yield significant revenue and cost synergies.

"Previously, the Partygaming/Bwin merger generated cost synergies of around 10% of the combined cost base and assuming a similar figure for Bwin.Party/GVC could provide up to circa €60m of synergies," he wrote.

He estimated that combined pro-forma revenue and EBITDA would be in the region of €844m and €152m, pre-synergies and that cost synergies alone could provide a boost of around 40% to pro-forma EBITDA.

At the 110p per share offer price, this would imply a 2015 p/e ratio of 16.2 times and an EBITDA multiple of 10 times.

However, Burns said that any potential earnings per share uplift remained uncertain given the potential dilution from a likely substantial equity raising.