[clevfan]

Empire Online sues PartyGaming for 'substantial damages'

12.06.2005, 05:27 AM

LONDON (AFX) - Online gaming firm Empire Online Ltd said it is seeking 'substantial damages' and injunctive relief in a Gibraltar court from rival PartyGaming PLC, owner of the world's biggest online poker site.

Cyprus-based Empire Online filed the lawsuit in Gibraltar, where PartyGaming is based.

Sources close to the situation say Empire is seeking 'several hundred million US dollars' in damages after PartyGaming separated the poker system used by its own players from that used by partner companies such as Empire.

Empire is understood to be effectively demanding that the contract, which PartyGaming scrapped, be re-instated.

Empire shares have lost three quarters of their value in the past three months.

Shares in the company which was worth as much as 840 mln stg at the height of the boom in online gaming shares, were first hit after PartyGaming warned of a slowdown in revenue growth at the beginning of September.

The stock was further rocked after PartyGaming in October effectively attempted to cut its reliance on the likes of Empire for the generation of new custom.

So-called skins such as Empire earn the bulk of their revenue by driving new punters to third parties' gambling platforms, in return for a share of the profit.

Empire says the switch by PartyGaming, its biggest client, was in breach of contract.

But PartyGaming, which shortly after scrapped an attempt to buy Empire, denies that.

Spokesman John Shepherd said PartyGaming remains 'highly confident of a successful outcome' to the litigation.

'I note that Empire put pantomime tickets up for sale this morning and I won't be buying any,' Shepherd said, pouring scorn on the lawsuit.

PartyGaming is understood to have sent a letter to Empire on May 4, spelling out its intention to shift players to the new platform, sparked off a lengthy series of correspondence between the two groups.

Sources close to the situation say Empire, which made no mention of the impending changes in its listing prospectus, was taken by surprise at the suddenness of the decision.

Empire Online shares nudged up 0.5 pence to 71 by 10.08 am, valuing the company at around 208 mln stg, while PartyGaming stock slipped 2.25 pence to 115.5, valuing the business at 4.6 bln stg.