Online poker gaming was a small player in the growing internet gambling market in 2004 until the purchase of Paradise Poker by Sportingbet. The deal brought to the business world’s attention just how big online poker had become and could become.
Sportingbet paid an initial $297m, approximately £169m based on currency valuation on the day of the purchase. It gave the founders of Paradise Poker an enormous return after just five years since the website was founded. The company raised the funds partly by negotiating a £90m deal with Barclays released shares to the value of £11.4m.
The anonymous trio, believed to be computer engineers from Canada, have always maintained their anonymity but were reported to have received a cash sum of £105m, a further £48.6m from share placing with the remainder coming in the value of shares in Sportingbet.
In 2006, they earnt a further £20m between them after Paradise recorded an operating profit of $150m over the following three years – the clause had been built into the contract. This was to be expected, as the acquisition of Paradise Poker by Sportingbet doubled the size of the company. It was a great deal all round as it was over seven times the annual profit of the company being bought out; Paradise Poker had a 10% share in the online poker market with good cash flow, and operating and profit margins.
Nigel Payne, CEO of Sportingbet commented at the time that 2004 was a great year for poker, trebling in the 12 months up to the purchase but admitted that online poker still had a long way to go. Not only was Sportingbet able to introduce poker to its own customers, but extend the benefits to customers of Paradise Poker to engage with online betting.
The growth in the early part of the last decade grew in the US thanks to greater awareness provided by televised events and the inclusion of celebrity poker players such as Ben Affleck and Nicole Kidman. In more recent years, Matt Damon has also taken part in live celebrity tournaments.
Some 80% of players on the Paradise Poker website in 2004 were American even though Paradise Poker was not registered in the US and had no legal assets (registered in Costa Rica but its server is based on a reservation in Montreal); this way, it could get around what was then stringent rules of The Wire Act. This law forbade gambling across state lines. In 2011, the provision of the law was defined as referring to online betting only. Mr Payne believed at the time that the company was not breaking any rules.