PartyGaming, the internet poker site that saw its share price collapse after the US moved against online gaming, is giving its chief executive a new bonus package that waives the performance criteria on his existing remuneration arrangements.
In addition to a £2 m cash payment for staying until next December, £3m in cash over three years and 15m in new share grants, Mitch Garber will have performance targets for his existing 20m share grants waived.
The rise in Mr. Garber’s remuneration package was announced at the same time as the group confirmed the acquisition of gambling assets from Empire Online and Intercontinental Online Gaming for $66.3m (£33.8m) in new shares.
PartyGaming said it was making the one-off change to incentives as the Unlawful Internet Gambling Enforcement Act had “severely impacted the value of incentive arrangements”.
John Shepherd, director of communications, said that at the time of his appointment in April when the share price was 150p, Mr. Garber’s remuneration package was worth more than £40m. After yesterday’s slight dip in the share price to 31 and tree-quarters p, it would be worth just more than £18m.
“Online gambling is a young and competitive industry, we think we have the best management team and we want to retain it,” said Mr. Shepherd.
However, the changes could raise concerns among some investors keen to have remuneration linked to performance.
The Association of British Insurers, whose members control almost 20 per cent of the UK stock market, said: “Pay proposals and incentive plans should be linked to performance to make sure they provide the best value for shareholders.”
Mr. Shepherd added that the only cash cost to the company would be the £2m payment, as the monthly cash payments, the 20m existing share grants, 15m new grants and 2m shares to be granted in May 2009 would come from the employee benefit trust – 200m shares, about 5 per cent of the total, that were put aside by the founders at the time of the initial public offering.
As well as the pay rise for Mr. Garber, PartyGaming yesterday confirmed the purchase of Empire Online’s trade and gaming-related assets for new shares worth about $48m.
The world’s leading listed online poker site said it had also agreed to buy Intercontinental Online Gaming’s business and assets for about $18.3m.
PartyGaming said it expected to generate earnings before interest, tax, depreciation and amortisation of at least $8.5m from the acquisitions.
PartyGaming shares feel a 1/4p to 31 and 3/4p while Empire Online shares rose 1/2p to 42 and 1/2p.
- By Tom Griggs