Online gambling firm GVC Holdings has raised its offer for Bwin.party Digital Entertainment to about £1 billion, topping a recently-accepted bid from 888 Holdings.
Bwin, which put itself up for sale last year, accepted a cash and stock deal worth almost £900m from online casino and poker firm 888 earlier this month.
The recommended deal is the latest in a flurry of M&A activity in the industry, a trend set to continue as firms expand to help offset increasing taxes and tighter regulation and fund higher marketing and technology spend.
GVC's offer of 122.5 pence per share, consisting of 25p in cash and the rest in new GVC shares, is 18% higher than 888's offer price of 104.09 pence.
Bwin confirmed it had received an offer from GVC and said it would make an announcement as and when appropriate.
The company has struggled with the decline of regulated poker markets in Europe since it was created via a merger of sports betting group Bwin and online poker group Party Gaming in2011.
"Whilst we believe the acquisition of Bwin would add value for GVC shareholders, and for Bwin shareholders represents a 12p (10% premium), in our view over the long term 888 would add more value," analysts at Panmure Gordon wrote in a note.
GVC said it would finance the deal through a combination of new GVC shares and a €400m senior secured loan from Cerberus Capital.
GVC's earlier offer of £908m was backed by its Canadian partner Amaya Inc.
The company also said it planned to raise about £150m through an equity placing to fund restructuring costs and refinance existing Bwin.party debt.
GVC, whose market value is less than a third of Bwin's, said the deal would lead to cost benefits of more than €135m per annum by the end of 2017.