Philippine billionaire Roberto “Bobby” Ongpin, the former chairman and controlling shareholder of PhilWeb Corp. (PSE: WEB), a leading gaming technology provider in the Asia Pacific region, said he’s seeking to sell his 53.76 percent stake in the company, in an altruistic effort to save the company and its employees, as well as some of the 5,000 employees of other Philipine e-Games operators. He also said he intends to donate P1 billion from the divestment proceeds, towards the government’s drug rehabilitation program.
Ongpin, a former Minister of Trade and Industry during the administration of dictator Ferdinand Marcos in the 1970s, says he’s presently in Europe having discussions with several investment banking firms which he intends to retain to manage the sale of his PhilWeb controlling stake, and will not return to Manila “until several weeks from now.”
Ongpin’s concerns are unsurprising, given that new Philippine President Rodrigo Duterte, who took office on June 30 after running on a platform to clean up the country, specifically named Ongpin in a speech in early August, as one of the “oligarchs that are embedded in the government” who he literally said he plans to “destroy.”
“These are the guys who just sit in their jets and in their mansions everywhere,” added Dutarte.
Ongpin, who is 79 years old, is currently the 18th wealthiest person in the Philippines with an estimated fortune of $1.2 billion, according to Forbes. Aside from PhilWeb, he is the chairman and CEO of real estate company Alphaland (ALPHA) and mining company Atok-Big Wedge Co (AB), and a director of San Miguel Corp. (SMC), PAL Holdings (PAL) and Petron Corp (PCOR). He’s also the chairman of Alphaland Balesin Island Club (ABICI).
In Hong Kong, he’s a director of Shangri-La Asia and deputy chairman of the South China Morning Post, both listed on the Hong Kong Stock Exchange. He is also a director of UK-based Forum Energy PLC. His other past and present major holdings include Brixton Energy & Mining, Philex Petroleum, Philex Gold Holdings, Philex Gold Philippines, Silangan Mindanao Exploration Co., Silangan Mindanao Mining Co., and Petroenergy Resources.
Since June 30, when they closed at P24.40, PhilWeb shares started plunging after Duterte ordered a stop to online gambling at his first cabinet meeting. The company’s shares closed at P6.72 on September 5, after the announcement of Ongpin’s official divestment plans and temporary departure from the Philippines.
PhilWeb, originally known as South Seas Oil and Mineral Exploration Co. Inc. when it was founded in 1969, was renamed as South Seas Natural Resources Inc. in 1984. In 2000, it changed its business focus to become an Internet company and changed its name to PhilWeb.Com Inc., and was subsequently renamed as PhilWeb Corp. in 2002.
In 2003, the company received a license from the Philippine Amusement and Gaming Corporation (PAGCOR) to launch e-Games Stations consisting of Internet cafes exclusively dedicated to casino games, which become its primary business. With PhilWeb’s technology patrons can choose from more than 300 casino games, including baccarat, blackjack, various slot machine games, video poker and sports-betting.
PhilWeb’s subsidiaries include BigGame Inc., e-Magine Gaming Corp., PhilWeb Asia-Pacific Corp., PhilWeb (Cambodia) Ltd., and Guam Sweepstakes Corp., among others.
There are reportedly 268 operating e-Games cafes across the Philippines, the majority of which are owned and managed by independent operators.
“After having resigned as chairman of PhilWeb, and after having made several offers to PAGCOR, all of which have been either rejected or ignored, it has become obvious to me that, while I remain a shareholder of PhilWeb, there is no chance that PhilWeb will be allowed any favorable reception on any proposal to PAGCOR,” said Ongpin. “Regrettably, it appears that I have no other choice but to totally exit from the company for it to have a chance to survive.”
ONLINE GAMBLING AND GAMING M&A ACTIVITY
The move comes a few months after Montreal, Canada-based Amaya Inc. (NASDAQ: AYA; TSX: AYA), the world’s biggest publicly listed online gambling company and owner of PokerStars, said it hired Barclays to explore a sale, as its chairman and CEO David Baazov, considered the “king of online gambling,” was forced to resign amid accusations of insider trading.
Earlier this year, CVC Capital acquired a majority stake in German gaming company Tipico for close to €1.5 billion ($1.68 billion). In December 2014, CVC acquired Sky Betting and Gaming for £800 million, consisting of five core brands Sky Bet (sports betting), Sky Vegas (online in-browser casino), Sky Casino (premium online casino, live table games), Sky Poker (online poker) and Sky Bingo (online bingo). CVC also made previous investments in British sports betting operator William Hill (2002 IPO exit, at 314% ROI) and the IG Group, a digital trading and betting platform.
“Sports betting contributed substantially to Sisal’s revenues (in 2015), with the Italian market growing by 24.7 percent compared with 2014,” said gaming industry analyst Joss Wood. “The March (2016) revenue figures issued by regulator AAMS show Sisal ranked fourth for online sports betting with monthly revenue of €23.4 million ($26.8 million).”
“Gaming companies with a larger online presence are likely to see higher revenue and EBITDA growth over the next 12-18 months than those more focused on traditional land-based business, as the gradual shift online continues, mobile phone and tablet penetration rises, and fast-growing demand for online games increases,” said Moody’s vice president and senior analyst, Donatella Maso.
UK-based William Hill Plc has the biggest online exposure by revenue, while pure online operator Sky Bet (Sky Betting & Gaming) has the most significant presence by percentage of total revenue. Conversely, Ladbrokes Plc is one of the largest gaming companies in the UK but its digital division still lags its peers and it reported negative EBIT in 2015, according to Moody’s.
While SNAI SpA’s revenues have surpassed Sisal’s following its acquisition of Cogemat SpA and it has gained leadership positions in retail sport and horse betting, “Sisal will remain more profitable mainly due to its more favorable product mix,” Maso said.
SNAI is Italy’s second-largest gaming company after International Game Technology. SNAI is also the leader in sports and horse betting and the third-largest concessionaire of amusement with prize machines and the second-largest of video lottery terminals by turnover.
The online sector’s fundamentals are expected to remain positive for at least the next two to three years, which will support high single-digit growth rates despite regulatory and tax pressures.
Potential legalization of online gambling or further liberalization of the rules that already govern it in some European markets and US states offer growth opportunities for large online gaming operators, which could offset uncertainty in regulatory regimes.
Europe, in particular, continues to see the creation of an increasing number of new regimes that permit licensed and regulated betting, notably through interactive platforms, and which is gradually removing the once dominant monopolistic approach favoring the lottery sector, according to the European Gaming & Betting Association (EGBA).
The continuing growth of professional sport and associated betting markets on a global scale, as a direct result of consumer demand driven by technological advances, has provided both business sectors with clear fiscal benefits and further strengthened their symbiotic relationship, says the EGBA. This has manifested itself in a range of mutually beneficial commercial ventures through direct sponsorship of sporting events, sportspeople and clubs, along with numerous indirect benefits to both products from media advertising deals around sport (where legislative frameworks permit).
In recent years, online gaming markets — including sports betting, poker, casino, bingo, lottery — have grown rapidly to €36.9 billion in 2014 from approximately €6.6 billion in 2003, and are expected to grow to approximately €42.8 billion by the end of 2018, says Moody’s.
The online gambling sector offers growth opportunities for European gaming companies in 2016-17 versus traditional brick-and-mortar operations, despite likely pressure from increasing taxes and regulation, says Moody’s Investors Service.
The recent wave of M&A is likely to continue as operators look to become bigger and more diversified to offset rising costs and compete more effectively. Operators will also increasingly look to develop technology platforms in-house, such as William Hill’s Project Trafalgar, to limit their reliance on third-party providers and reduce customer acquisition and marketing costs, Moody’s added.
Photo: Roberto V. Ongpin, Chairman of Alphaland and Atok-Big Wedge; Former Chairman of PhilWeb Corp.