Activist investor Jason Ader wants Canadian online gambling operator Amaya Gaming to forget David Baazov’s takeover bid and get back to making money.
Last Friday, Toronto’s Globe & Mail newspaper published a look at the “murky” finances underpinning Baazov’s C$24-per-share offer to acquire Amaya and take it private. The article quoted a letter that Ader’s SpringOwl Asset Management sent Amaya on Thursday, urging the board to reject Baazov’s bid and to cut the cord for good with their former CEO.
In the letter, SpringOwl CEO Ader (pictured right) said it is “time for the company to fully move on from the undue influence” of Baazov (pictured left). Ader called Baazov’s bid “a continued attempt by a discredited former executive to capitalize on the Amaya situation at other shareholders’ expense.”
Ader said SpringOwl was “not supportive of the self-interested, unsubstantiated potential transaction” which, given Baazov’s “current legal situation and the lack of clarity … has significant risks to closing.”
SpringOwl holds over 2% of Amaya, having doubled its stake since September 30. Ader is not shy about voicing his opinion regarding his investments, having successfully led the charge to force the underperforming Bwin.party digital entertainment to make some badly needed strategic shifts and changes in its board of directors a couple years ago.
Ader’s letter suggested Amaya would be better off forgetting Baazov’s bid, putting his 17% stake in the company into trust and stop paying his salary and legal fees. Only when that clean break is made does Ader believe Amaya can get back to focusing on its ongoing efforts to boost its new casino and sports betting verticals.
Baazov’s latest bid took a seriocomic turn when one of the four investment firms he claimed were backing his bid said it had never heard of Amaya. Baazov later admitted he’d been punked by someone claiming to represent that company, while his followup bid erased another of the original four backers without so much as a word of explanation what happened.
On Monday, Ader told Bloomberg Markets that if Amaya received “a credible bid with transparency, then we should consider it. But the current price seems low and the lack of transparency and the information about [Baazov’s] sources of funding raises a lot of questions.”
THOSE MURKY FINANCES
The Globe & Mail expressed doubt regarding the ability of Baazov’s two remaining Hong Kong-based backers – Head and Shoulders (H&S) Financial Group and the Goldenway Group – to supply the US $3.45b that Baazov has committed to paying for Amaya.
The two companies are privately held, making their true financial picture tough to gauge. But Hong Kong-based corporate governance advocate Andrew Webb obtained documents from H&S’ aborted initial public offering earlier this year, which showed the firm had just $79m in assets under management, while Goldenway reportedly has similarly modest holdings.
Undaunted, H&S controlling shareholder (and high-stakes poker player) Stanley Choi claimed his firm has “more than sufficient capital committed with our [limited partners] for our commitment to the Amaya transaction.”
Two weeks ago, Goldenway director Ricky Lai was similarly confident, stating that his firm had the ability to invest up to $800m in Baazov’s bid. But last week, Lai told the Globe & Mail that “all the investment structure details and participants are not yet finalized.” Lai also suggested “there will probably be more than three entities eventually” supporting Baazov’s Amaya bid.
Baazov’s spokesman Riyaz Lalani told Bloomberg that his boss “stands behind his offer and intends to continue engaging constructively with Amaya towards a board-supported transaction.” Amaya spokesman Eric Hollreiser said only that the company “will continue to engage constructively” with SpringOwl.
