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As dealmaking increases, the online gambling sector is heating up.hywit dimyadi/Getty Images/iStockphoto

Fledgling online gambling company Intertain Group Inc. isn't taking any chances with takeover rumours.

The Toronto company took the unusual step of requesting a temporary halt in its stock Tuesday morning to announce advanced discussions to acquire unnamed assets for about $1-billion. A spokesman for Intertain said the company made the request after the company's advisors became concerned about deal rumours. The spokesman would not identify the target and although talks are in the final stages, he said, "it is still subject to board approval."

British and Canadian media have been speculating since November that Intertain is poised to buy European online gambling assets.

It is almost unheard of for acquirers to tip their hand in takeover negotiations ahead of a formal agreement, because the news can derail a deal. Investors typically punish acquirers by selling their stock and bidding up the takeover bill by investing in target company share prices.

These trading practices, however, have not applied to a takeover model pioneered last year by Intertain's largest shareholder, Amaya Gaming Group Inc., when it agreed to buy Rational Group Ltd., a British online gambling company, for $4.9-million. The acquisition cost was more than four times Amaya's total market capitalization, which meant that the Montreal company needed to see a meaningful jump in its stock price to raise enough money through equity and debt to finance its outsized ambitions.

In the months leading up to Amaya's June purchase of Rational Group – owner of the world's largest online poker website, PokerStars – the company's stock soared more than 60 percent to over $14 a share amid speculation that a takeover was imminent. When Amaya announced the planned deal, its stock continued its rapid ascent, reflecting broad investor support for the transformative promise of a little gambling fish buying a whale. By November, Amaya's orbiting stock hit a high of nearly $40.

Intertain is clearly borrowing from Amaya's playbook. With a market capitalization of about $540-million, it will need investor support to sell additional equity and debt to pay for its ambitious $1-billion potential purchase. If today's market reaction is any indication, investors are onside. Hours after Tuesday's morning trading halt, Intertain's stock was up over $1.75 a share to $16.50 on the Toronto Stock Exchange just short of its record high of $17 in November.

What Intertain doesn't want to repeat is the regulatory nightmare that followed the steep runup in Amaya's stock price ahead of its takeover news last summer. Quebec's securities regulator, Autorité des marchés financiers (AMF), has launched an investigation into trading in Amaya's stock near the time of the June acquisition announcement.

A spokesman for Intertain said the AMF's investigation had no bearing on its decision to reveal its takeover talks. "We have nothing to do with that. Whatever happened to Amaya is their situation," he said.