It was expected that Cyprus-registered gaming operator Ritzio Entertainment Group would float on the London Stock Exchange by June 2006. It now appears that the IPO will be delayed indefinitely, or at least until the new Russian gaming laws have been enacted. A bill proposing changes in regulations, including allowing one licence for every 200,000 residents and the increase in net asset requirements for operators, has already passed its first reading in the lower house of the Russian State Duma.

Ritzio controls around 10% of the Russian gambling industry as well as operating in Ukraine, Kazakhstan, Latvia, Lithuania and Estonia. The company has around 35,000 slot machines and in the first half of 2005 reported sales of nearly US$290 million. Boris Belotserkovsky, Chairman of the giant Russian Unicum Group and part owner of Ritzio, has said that until the new rules for operating in Russia were made clear, investors would be unlikely to offer full value for Rirzio shares.

Growing wealth in Russia has given several Russian companies the desire to raise funds for expansion with Stock Exchange debuts. One of the country’s biggest independent television broadcasters, TV3, is set for a London flotation next month if prevailing market conditions are suitable. The strategic objectives for Ritzio had included becoming an international publicly traded company by 2006 as well as increasing stability and achieve consistent business growth through geographical diversification.

Ritzio had planned to be operating 60,000 slot machines by the end of this year, with annual sales volume of US$940 million. New projects outlined for the company include shipboard casinos and entertainment centres, and the company intends to venture into operations in Germany, Poland, Spain, Romania and Kirghizia. The initial public offering was to have been for 15% of Ritzio shares with an anticipated capitalization of around US$2 billion.

It is possible that the new Russian gaming legislation will reduce slot machine numbers in the country from 400,000 to 100,000, and that Ritzio would lose many of its slots outlets. Until the company knows the full extent of the rule changes and can make the necessary adjustments to its business, it is unlikely that Ritzio shares will be offered to the public. (E-05.22.06)

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