* Talks abandoned less than two weeks after announcement
* Sector consolidating as more gamblers go online
* European rivals have already joined forces
* Amaya FY revenue forecast below market expectations
* Amaya shares drop 8.3 percent (Adds share move, Amaya spokesman comment)
By Kate Holton and Simon Jessop
LONDON/TORONTO, Oct 18 (Reuters) - William Hill andCanadian online gambling company Amaya Inc haveabandoned merger talks, leaving the British bookmaker strugglingto find a partner in a fast consolidating industry.
Amaya, operator of the PokerStars website, and William Hill,one of the best-known British gambling brands, said earlier thismonth they were in talks about a merger of equals but the dealwas thrown into doubt days later when a leading investor inWilliam Hill said it would oppose the plan.
The Canadian company said it had decided it could bestdeliver shareholder value by remaining an independent company,while William Hill said it decided to walk away after canvassingits biggest investors. Amaya shares tumbled 8.3 percent.
William Hill investor Parvus Asset Management, which cameout against the Amaya deal last week, welcomed the news.
"We're pleased that the board has decided to cancel thetalks with Amaya, and, from our perspective, we're lookingforward to working constructively with the board with regard tocreating shareholder value for William Hill owners," Parvusco-founder Mads Gensmann said.
William Hill is looking increasingly isolated after Europeanrivals Paddy Power and Betfair joined forces, whileLadbrokes agreed to unite with unlisted Gala Coral.
Betting companies are facing tighter regulation and highertaxes in countries such as Britain and need to adapt to anenvironment in which younger and more tech-savvy gamblers areincreasingly betting online or via smartphone.
Amaya, which had been evaluating strategic alternativessince earlier this year, said it has ended that process. It hadalso received interest from GVC Holdings and privateequity firms, sources have told Reuters.
"It was a pretty intensive process, and we had a number ofinterested parties at various stages and in various depths,"Amaya spokesman Eric Hollreiser said.
"It was the conversations with William Hill that progressedthe furthest," he said. "We thought at the time, and in factstill think at this point, that there's a lot of strategic andindustrial logic to the potential pairing."
LOOKING FOR ALTERNATIVES
William Hill appears to have lost momentum afterlong-serving Chief Executive Ralph Topping left the company twoyears ago. His successor James Henderson departed in July afterthe board said he was failing to deliver enough growth in onlineand international gambling.
The company subsequently rejected a joint takeover approachfrom smaller online rival 888 and casino and bingo halloperator Rank Group in August.
That turned the tables on William Hill which had made a 720million pound ($895 million) bid for 888 last year.
In a statement on Tuesday, William Hill said it was focusingon the priorities set out by interim CEO Philip Bowcock: online,technology, efficiencies and international.
It said the company would "continue to consider strategicalternatives where they have the potential to create shareholdervalue."
Its shares added 1.5 percent to 309.6 pence, valuing thecompany at around 2.65 billion pounds.
Amaya said it had been informed by its former chiefexecutive, David Baazov, that he remained interested in buyingthe company but that the firm had not received an offer capableof resulting in a transaction.
Amaya said in February it had received a non-bindingproposal from Baazov to take the company private, but the formalbid never came.
Amaya also said on Tuesday it expects to report full-yearrevenues of between $1.13 and $1.16 billion, lower than theaverage forecast of $1.17 billion, according to Thomson ReutersI/B/E/S. The company expects earnings to be between $1.71 and$1.82 per share, compared with an average forecast of $1.72. ($1 = 0.8042 pounds)
(Additional reporting by Matt Scuffham, John Tilak and AlastairSharp in Toronto; Editing by Keith Weir, Frances Kerry andMeredith Mazzilli)
