LADBROKES, the gaming group, confirmed last night that it was in talks to buy 888, the online betting company, for an estimated £470 million.

The discussions pit Ladbrokes against PartyGaming, another online betting company, which has also held merger talks with 888 as it looks to prop up its business following America’s recent crackdown on internet gambling.

In a terse statement, Ladbrokes said: “The Board of Ladbrokes notes the speculation in the weekend press and the company can confirm that it is in the early stages of reviewing a possible transaction involving 888. No decision has been made as to whether any proposal will be made to 888.”

888, which last week confirmed that it was in discussions with several unnamed potential merger partners, is thought to favour a tie-up with a traditional gaming company over another online venture that would also be reeling from the US prohibition of making online gambling transactions.

On Friday PartyGaming, which was the world’s leading online gambling company until the American crackdown, made redundant 800 of 1,750 staff who work on customer and technical support in Hyderabad, India. More job cuts are expected in London and at its headquarters in Gibraltar.

If a deal between Ladbrokes and 888 goes ahead, Avi and Aharon Shaked, the Israeli brothers who own just over half of 888, would become major shareholders in Ladrokes. The acquisition of 888 is expected to enable Ladbrokes to cut about £9 million from head office and staff costs. The Shaked brothers set up 888 in 1996 after Aharon, a dentist, went to a conference in Monte Carlo and noted the popularity of online casinos. The brothers made about £52 million each when they floated about a third of the company last year.

888’s shares suffered less than its key rivals after America’s decision to clamp down on internet gambling. Although the US accounted for 60 per cent of its revenues, this is less than its competitors. However, the stock is down by 27 per cent since America’s get-tough policy was introduced.

The Unlawful Internet Gambling Enforcement Bill is part of an intensifying campaign in the US to reduce gambling. Bill Frist, the Republican leader in the Senate and an architect of the new legislation, said last month: “Gambling is a serious addiction that undermines the family, dashes dreams and frays the fabric of society.

“The bottom line is simple: internet gambling is illegal. Although we can’t monitor every online gambler or regulate offshore gambling, we can police the financial institutions that disregard our laws.”

• Tim Bunting is set to resign as chairman of Betfair, the online betting company, and is expected to join a private equity firm. Mr Bunting will be replaced by Ed Wray, a co-founder of Betfair.

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