Amaya plays its cards right, buys PokerStars for $ 4.9 billion
Purchase of online gambling firm eases way into U. S. market
TORONTO — If Amaya Gaming Group Inc.’ s CEO plays poker the way he runs his business, you’d be wise to walk the other way if you see him at the table.
Through a series of aggressive plays leading up to this week’s acquisition of PokerStars, David Baazov has turned the little- known technology supplier into a serious player in the online gambling world.
With the $ 4.9- billion US takeover of PokerStars — another online gambling juggernaut with Canadian ties — Amaya will become the largest publicly traded Internet gambling company in the world. The deal will also make a billionaire out of Mark Scheinberg, chief executive officer of PokerStars’ parent company, Rational Group Ltd.
“David Baazov has done an unbelievable job. It’s just one by one, each transaction transforming the company a bit and giving it more strength,” said Ralph Garcea, an analyst with Global Maxfin Capital Inc.
With Scheinberg poised to step down, and the company under new ownership, Amaya hopes to solve PokerStars’ main problem: exclusion from American states where it ran afoul of online gambling laws that have since made the industry legal. In 2012, PokerStars agreed to a $ 731- million US settlement over money- laundering charges in the U. S.
Mark Scheinberg’s father, Isai Scheinberg, who remains under indictment in the U. S., is contesting the charges and denies wrongdoing. Mark and Isai Scheinberg reside in the Isle of Man, where PokerStars is based, but both are Canadian citizens and used to live in the Toronto area.
The Scheinbergs may be gone, but Amaya said it plans to retain PokerStars’ executive management team. Garcea said that shouldn’t pose a problem for PokerStars re- entering the U. S. market.
“The issues were with the founders and they’re stepping aside,” Garcea said.
In a conference call with investors Friday, Baazov said the fact Amaya is already operating in the U. S. online gambling industry should help with the reintroduction of PokerStars. “We anticipate Amaya’s track record in the United States has the potential to facilitate a speedier entry into the U. S. for ( PokerStars parent company) Rational’s brands,” he said.
Amaya is financing the acquisition with a large amount of debt — $ 2.9- billion US of bank loans, in addition to about US$ 1.6- billion of equity and convertible securities. Deutsche Bank, Barclays Bank, Macquarie Capital USA and GSO Capital Partners LP underwrote the deal.
The company’s stock soared Friday after the deal was announced late Thursday evening. Amaya’s shares closed almost 42 per cent higher at $ 19.95 on the TSX. Baazov, who holds 26 per cent of Amaya’s shares, is positioned for a handsome personal gain.
Garcea said there are more lucrative opportunities ahead if the company stays on the right track. The online gambling market is relatively mature in most parts of the world, but with American states starting to legalize it, the growth potential is huge, he said.
Both the Scheinbergs and Baazov declined interview requests. But the history of Amaya’s acquisitions under his leadership suggest he has been thinking big for a long time.
Amaya made four major acquisitions during an 18- month period starting in 2011, including gambling machine manufacturer Cadillac Jack, which put Amaya on its path to becoming a major Canadian technology player.
With stakes in both casinos and online gambling, Garcea said it wouldn’t be surprising to see the PokerStars brand on more real- world gambling equipment and tournaments.
In a 2012 profile in Global Gaming Business Magazine, Baazov suggested he’s had his eye on that prize all along. “Amaya was built on the vision of providing content to the gaming industry on a common platform across all media … whether physical, virtual, interactive or mobile,” Baazov said.