Non-Execs to Net Big Fees In Float Of PartyGaming

The independence of PartyGaming's non-executive directors was called into question last night after it emerged that they will receive big payments when the online poker company completes its £4.76 billion flotation.

Brian Larcombe, the former 3i chief executive, will get a one-off fee of £1 million as deputy chairman and senior nonexecutive. Three other nonexecutives, Lars Berg, Nigel Kenny and Rod Perry, will each get £100,000.

Mr Larcombe, who like the others is reinvesting 60 per cent of his payment in shares, will also get a salary of £175,000, while his colleagues will get £75,000.

In its flotation prospectus, published yesterday, PartyGaming insisted that the arrangements are "not such as could prejudice the independence" of the four men.

The document also raised the alarming prospect that the owners could face arrest and prosecution in the United States. It admits that the company's activities "are considered to be illegal by the relevant authorities", but says that case law has established that online poker sites are excluded from gambling legislation.

Analysts have also expressed surprise at the three-year contract awarded to Michael Jackson, the chairman, in defiance of the Combined Code on Corporate Governance. He will also get a one-off payment of £1.5 million. Mr Jackson's decision to retain his chairmanship of Sage Group, the accountancy software firm, also breaches the code, which stipulates that one individual should not hold two FTSE chairmanships.

A PartyGaming spokesman said that Mr Jackson's experience of high-growth companies and technological services had made him uniquely qualified for the job, and the length of his £500,000-a-year contract had been necessary to hire him.

He added: "As we refined down what we were looking for in a chairman, the only man left standing was Michael Jackson. Michael ticked every box."

Richard Segal, the chief executive, will receive shares worth up to £51 million at flotation, of which he plans to sell about £10 million at that time. His salary is £500,000 and he will also receive £40,000 a year to cover accommodation in Gibraltar, where PartyGaming is based.

Mr Segal will stay in Gibraltar during the week, returning to the UK at weekends. The cost of his commuter flights will also be covered by the company.

PartyGaming, which owns the Party Poker website, yesterday confirmed an indicative price range for its listing of 111p-127p, valuing it at £4.44 billion to £5.08 billion, or £4.76 billion at the midpoint. Its four owners are cashing in up to £930 million at flotation, retaining a combined 71.5 per cent stake.

That is at the bottom end of previously mooted valuations and some investors believe the shares will have to be priced lower still to get the flotation away. One big institution said it believed that £4.2 billion to £4.4 billion was a more realistic price range.

The main issue surrounding the flotation — shares are due to start trading on June 30 — is the regulatory risk, in particular the grey area of internet poker in the US, where most of its players are based.

One fund manager said: "We are very sceptical about it. There is the whole risk profile, although it has been priced at a discount to others in the sector." Cantor Index, the spread betting firm, has set a grey market spread of 111p-116p.