Amaya Gaming Purchases PokerStars in $4.9 Billion Deal
Canadian i-gaming company Amaya Gaming announced late Thursday night the terms of a deal with Isle of Man-based online giant Oldford Group Ltd., parent company of both Rational Group and online sites PokerStars and Full Tilt, in which Amaya obtains Oldford’s complete business-to-consumer business, including both PokerStars and Full Tilt.
The purchase includes live-event series such as the European Poker Tour along with Stars and Tilt, and the rights to additional live and online poker programming developed in association with the two online sites. All of the assets will be transferred into a wholly owned subsidiary of Amaya.
The deal also calls for Rational Group co-founder and current CEO Mark Scheinberg, and other principals, to dispose of their shares of Oldford Group to the Amaya subsidiary. Scheinberg and other principals will also resign their positions with Oldford. However, Rational Group’s executive management team will remain intact and the operations of PokerStars and Full Tilt will remain unchanged. Scheinberg’s father, Isai, the other co-founder of Rational Group and PokerStars, had previously resigned from the company.
The move is expected to clear away some of the legal hurdles remaining which have hampered world-leading PokerStars from re-entering the newly regulated United States market. The senior Scheinberg, Isai, remains under federal indictment in connection with 2011’s “Black Friday” crackdown against former US-facing online poker sites. Mark Scheinberg himself paid a $50 million settlement to the US last June to end an investigatory probe, while PokerStars separately paid a massive $731 settlement to the US in 2012 over its alleged Black Friday misdeeds while admitting no wrongdoing.
Without referencing PokerStars’ ongoing US difficulties specifically, a press release issued by Amaya and PokerStars stated, “Amaya believes the Transaction will expedite the entry of PokerStars and Full Tilt Poker into regulated markets in which Amaya already holds a footprint, particularly the U.S.A.” Amaya is already a licensed service provider in New Jersey, one of the three US states to have regulated online poker to date.
“This is a transformative acquisition for Amaya, strengthening our core B2B operations with a consumer online powerhouse that creates a scalable global platform for growth,” said David Baazov, Amaya’s CEO. “Mark Scheinberg pioneered the online poker industry, building a remarkable business and earning the trust of millions of poker players by delivering the industry’s best game experiences, customer service and online security. Working with the experienced executive team at Rational Group, Amaya will continue that tradition of excellence and accelerate growth into new markets and verticals.”
Mark Scheinberg added, “I am incredibly proud of the business Isai and I have built over the last 14 years, creating the world’s biggest poker company and a leader in the iGaming space. Our achievements and this transaction are an affirmation of the hard work, expertise and dedication of our staff, which I am confident will continue to drive the company’s success. The values and integrity which have shaped this company are deeply ingrained in its DNA. David Baazov has a strong vision for the future of the Rational Group which will lead the company to new heights.”
The deal’s $4.9 billion price tag is described as an “all cash” transaction in which much of the sales price is deferred, and is still subject to Amaya shareholder approval. Amaya will pay Oldford Group $50 million as an immediate deposit, with another $4.45 billion in cash due upon official closing of the deal, “as adjusted in accordance with debt and working capital provisions” set out in the purchase agreement.
The final $400 million of the $4.9 purchase total is a deferred payment due either in July of 2017 or 30 months after official closing of the deal, subject to other financial adjustments.
Amaya plans to secure financing of the deal via a package of loans totaling $2.9 from three major US-based banks or financing institutions, Deutsche Bank, Barclays and Macquarie Capital. Another $1 billion will be raised via the issuance of a series of preferred stock in Amaya, and an additional $500 million through placement of existing Amaya common stock.
The deal had been rumored for several weeks, and spurred a massive run-up in the price of Amaya’s own stock price that forced the company to make a noncommittal statement last month regarding the PokerStars purchase rumors. Amaya has been a very active player in purchasing and selling various i-gaming platforms to complement its own gaming-software business, though the prior deals pale in scope compared to yesterday’s Stars announcement.
The massive 11-page presser released jointly by Amaya and PokerStars also includes a table of transaction highlights, detailing many of the most important elements of the acquisition:
KEY TRANSACTION HIGHLIGHTS
The Transaction will result in Amaya becoming the world’s largest publicly-traded online gaming company. The online poker platforms PokerStars and Full Tilt Poker are collectively the world’s most popular and profitable online poker brands with more than 85 million registered players on desktop and mobile devices.
For calendar year 2013, pro forma combined revenue, EBITDA and adjusted EBITDA1 of Amaya and Oldford Group were $1.3 billion, $474.8 million and $473.8 million, respectively. For 2014, the Corporation is projecting pro forma adjusted EBITDA, assuming the Transaction had been completed as of January 1, 2014, of between $600 and $640 million.
The Transaction combines complementary businesses with minimal overlap: Isle of Man-headquartered Rational Group’s B2C poker business including PokerStars, Full Tilt Poker, live poker tours and events, and online and TV poker programming; and Montreal-headquartered Amaya’s B2B interactive and physical casino and lottery gaming solutions.
Under the terms of the Transaction, Oldford Group shareholders led by Mark Scheinberg, founder and Chief Executive Officer, will dispose of their shares to a wholly-owned subsidiary of Amaya. Mr. Scheinberg and other principals of OIdford Group will resign from all positions with Oldford Group and its subsidiaries on completion of the Transaction.
Rational Group’s executive management team will be retained and online poker services provided by PokerStars and Full Tilt Poker will be unaffected by the Transaction, with players continuing to enjoy uninterrupted access to their gaming experience.
The boards of directors of both Amaya and Oldford Group unanimously approved the Agreement.
The Transaction 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 preferred shares.
Affiliates of GSO Capital Partners LP (“GSO”), the credit division of The Blackstone Group (NYSE: BX), have agreed to participate in the debt financing, to subscribe for $600 million in convertible preferred shares, and to purchase $55 million of common shares of the Corporation with each common share priced at C$20 upon closing of the Transaction.
An investment manager (the “Investment Manager”), on behalf of its clients, has agreed to participate in the debt financing, to subscribe for approximately $270 million in convertible preferred shares, and to purchase approximately $55 million of subscription receipts.
No change related to this Transaction is contemplated for Amaya’s Board of Directors.
Amaya scheduled a live conference call for this morning with shareholders to explain the terms of the deal more fully. Amaya’s annual scheduled shareholder meeting had been scheduled for Tuesday, June 17th, but will now be pushed back to July 30th, 2014 to allow shareholders to examine the terms of the massive acquisition. A vote on the deal is expected at that time.