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888 close to deal as trading improves

LONDON (Reuters) - Online gaming firm 888 said on Monday it is close to making an acquisition after strong trading from its casino, bingo and sports betting web sites led to an improved overall performance in the second quarter.

Chief Executive Gigi Levy told Reuters that 888 is in talks with a number of targets and expects a deal to be completed soon.

“One of them is very close to closing. It’s a bolt-on but would help us in our business-to-business strategy. A few others are at an earlier stage,” Levy said in a telephone interview.

Levy said he is confident the company could raise at least one times EBITDA to fund acquisitions. The consensus forecast for full-year EBITDA currently stands at $52.5 million, according to a Reuters Estimates poll of six analysts.

888 also holds cash of $110 million and has no debt.

888, in common with other online gaming companies, is targeting the business-to-business segment to drive growth as tough economic conditions put pressure on its consumer business.

The company’s business-to-business division takes 888’s existing software and infrastructure and provides those services to third parties.

888 reported second-quarter operating income of $61 million, up 7 percent on the previous quarter. Casino income was $29 million, up 10 percent on the first quarter.

The emerging offering, which includes bingo and sports betting, had income of $7 million, up 40 percent.

888’s performance contrasted with PartyGaming, which said in July its second quarter trading had been in line with the first quarter.

Shares in 888 were trading at 85 pence, up 3.4 percent at 0950 GMT. PartyGaming were down 0.2 percent to 255.5 pence.

Evolution Securities analyst Ivor Jones described the second-quarter growth as “particularly encouraging” and reiterated his ‘buy’ rating and 192 pence price target.

“The potential for M&A underpins our enthusiasm,” he said.

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