* 888 likely to have to raise 900 million Bwin bid
* Smaller rival GVC set to confirm its higher proposal
* Bwin to update investors on Tuesday (Writes through, adds shares, quotes)
By Neil Maidment
LONDON, Aug 28 (Reuters) - A battle to buy online gamblingfirm Bwin.party is set to intensify this weekend with888 likely to have to raise its 900 million pound ($1.4billion) offer to see off smaller rival GVC.
Bwin, up for sale since November, accepted a cash and stockoffer from 888 in July but has spent recent weeks working with GVC to iron out certain issues with an improved 1.03 billionpound proposal GVC made on Aug. 7.
Bwin on Thursday invited GVC to go ahead and present itsbest formal offer. Bwin has promised an update to the market onTuesday after a long holiday weekend in Britain.
The bid battle fits into wider consolidation in the gamblingsector as firms try to bulk up in response to higher tax billsin Britain and tighter regulation.
"My gut feeling is that GVC will raise its offer (to confirmits Aug.7 proposal) and 888 will improve their offer to ensurethey emerge victorious," Canaccord analyst Simon Davies said.
888's bigger business, balance sheet and marketcapitalisation made it the more attractive suitor, he added.
STRESSFUL WEEKEND
888 Chairman Brian Mattingley said on Friday the greatercash component of its bid -- 39.45p versus the 25p proposed byAIM-listed GVC -- meant it remained the most compelling option.
"We are still very confident we will get this transactionover the line," Mattingley said, declining to comment on whetherit would be prepared to raise its bid.
"All I can say is I'm not going to have an easy bank holidayweekend."
All three firms published first half results on Friday, withprofit rises for Bwin and GVC. 888 showed underlying revenuegrowth but its headline profit figure was hit by a new UK onlinetax and the introduction of sales tax in some Europeancountries.
Bwin said cost savings had helped offset such tax pressuresto lift adjusted core earnings for the six months to June 30 to47.3 million euros, slightly ahead of analyst forecasts of 45.4million euros. It remained confident on its full-year outlook.
888, which like Bwin offers casino, poker, bingo and sportsbetting, said adjusted core earnings for the same six monthsperiod fell 17 percent on a year ago to $40.9 million, hurt bytax charges of $19.5 million in the period.
Underlying revenue was up 9 percent however and the firmreiterated its full-year outlook with current trading 'solid'.
GVC also reported its first half results, posting a 14percent rise in adjusted core earnings to 25.5 million euros onrevenue up 15 percent.
Shares in Bwin were down marginally on Friday, with 888 downby almost 1 percent. Shares in GVC were up 0.6 percent.
($1 = 0.6502 pounds) (Editing by Keith Weir)
