As first predicted on CalvinAyre.com last month, Canadian gambling solutions provider Amaya Gaming Group has struck a deal to acquire online poker giants PokerStars and Full Tilt Poker for a whopping $4.9b. Rumors of a pending deal had intensified this week as Amaya’s stock surged 17% on Thursday, which followed a 10% gain on Wednesday. Amaya halted trading in its shares mid-Thursday, promising an announcement was coming, and boy, were they not kidding.
According to a press release (viewable here), a wholly owned Amaya subsidiary will pay $4.9b to assume 100% of the issued and outstanding shares of the Oldford Group, the privately held parent company of the Isle of Man-based Rational Group, which controls Stars, FTP and Stars’ live poker tours and events.
Oldford shareholders, including CEO Mark Scheinberg, will dispose of their shares to the Amaya subsidiary. Once the transaction is complete, Scheinberg and other Oldford principals “will resign from all positions with Oldford Group and its subsidiaries.” Rational’s executive management team will be retained.
The release also allowed some insight into the previously unknown world of Stars’ financial performance. The Oldford Group says it recorded revenue of $976m and $1.1b in 2012 and 2013 respectively, adjusted earnings of $342m and $420m, and cash flow from operations of $267m and $317m.
The deal, which is subject to approval from Amaya shareholders, will be financed through “a combination of cash on hand, new debt, a private placement of subscription receipts, a private placement of common shares and a private placement of non-voting convertible shares.” Financial institutions contributing capital include Deutsche Bank, Barclays and Macquarie Capital.
GSO Capital Partners, the credit division of private equity firm Blackstone Group, is subscribing for $600m in convertible preferred shares and will purchase $55m of common shares at $20 apiece. An unidentified “investment manager” will subscribe for $270m in shares and will also buy $55m subscription receipts.
THE COMPULSORY LOGROLLING
Amaya CEO David Baazov (pictured right) got in an early candidate for understatement of the year by calling the deal “a transformative acquisition” for his company. In a few short years, Amaya has gone from providing SMS lottery technology in countries like Kenya to one of the biggest online gambling companies in the world.
Baazov praised Scheinberg for “earning the trust of millions of poker players by delivering the industry’s best game experiences, customer service and online security.” Baazov pledged to “continue that tradition of excellence and accelerate growth into new markets and verticals.”
Scheinberg said he was “incredibly proud” of the business he and his father Isai Scheinberg had build over the last 14 years. Scheinberg said Baazov had “a strong vision for the future of the Rational Group, which will lead the company to new heights.”
Baazov will focus on leading Stars and FTP back to US shores, starting with New Jersey, where Amaya is already providing casino services to some of the state’s licensed online gambling operators. How this will go over with Amaya clients like Caesars Interactive Entertainment – which led the (until now successful) campaign to keep Stars from being licensed in New Jersey – remains to be seen.
Stars has a pending online partnership with the Resorts Atlantic City casino and the Division of Gaming Enforcement has left the door open for Stars to be licensed “if significantly changed circumstances are demonstrated.” With the Scheinbergs now out of the picture, the lingering concern over their unresolved Black Friday criminal indictments would appear to no longer apply.
Amaya is holding a conference call and webcast presentation on Friday at 8:30am ET. You can access the webcast at this link.