Partygaming and Empire in bust up

Empire Online issued a profits warning last month

Gaming firm Empire Online, which promotes internet poker and casino sites, has said it has pulled out of takeover talks with rival Partygaming.

It also plans legal action "in relation to damage caused" by the conduct of firms in the Partygaming group.

Partygaming confirmed talks had ended and that it made a revised approach last week of 60p a share - valuing Empire at around £176m ($330m).

It said it was "highly confident" of a successful outcome in any legal action.

Earlier this month Partygaming said it had made a takeover approach to Empire.

However, Empire said Partygaming's revised offer was one which "cannot be recommended".

Having received legal advice, the directors intend to institute and vigorously pursue legal proceedings as soon as possible Empire Online statement Check Partygaming's shares Check Empire's shares

The initial approach from Partygaming was an all-share offer, which valued Empire Online at 10% of the value of the enlarged company.

Following a "protracted due diligence process and continued delays in the timetable", Partygaming made a revised proposal, the Empire statement said.

"That is significantly different both in terms of the price and structure and at a level that cannot be recommended - Empire Online has therefore terminated discussions with Partygaming," it continued.

Shares in Empire Online, which peaked at 283 pence in September, closed up 8%, or 5.5p, at 69p on Monday.

Players diverted

In October, Empire was forced to issue a profit warning after its users were blocked from using sites run by Partygaming.

Empire Online Founded by Israeli businessman Noam Lanir in 1998 Poker accounts for 66% of its business while casino makes up remainder Floated on stock market in June with a value of £500m

On Monday, Empire said that its directors had looked into whether it might take legal action "in relation to damage caused to it by the conduct of companies within the Partygaming group in separating the poker system used by Partygaming players from that of its 'skins'".

"Having received legal advice, the directors intend to institute and vigorously pursue legal proceedings as soon as possible," Empire added.

Skins are online poker websites, like Empire, which divert their poker players to a software platform operated by another poker site, such as Partygaming.