PokerStar Deal Favours Amaya Gaming

When Amaya Gaming’s CEO David Baazov walked into private equity firm Blackstone Group’s office earlier this year seeking financial backing to buy one of the world’s biggest poker company, PokerStars, his seemingly ludicrous proposal was rejected and he was shown the exit. A couple of months later, the 33-year old completed the deal and emerged as the king of online gambling, besides his company performing overwhelmingly well. So goes the saying – Fortune favours the brave.

David Baazov

The deal

On August 10, Amaya announced that it had completed the acquisition of 100 percent of the outstanding shares of Rational Group, which operates PokerStars, Full Tilt and other popular poker brands for a total deal value of $4.9 billion. The transaction was financed in a combination of liquid cash, private placement of subscription receipts, dew debts and private placement of non-voting convertible shares and common shares. After the purchase Rational Group CEO Mark Scheinberg said that he expects PokerStars and its other poker brands to increase business with the combined leadership of Amaya and Rational executives.

Post the purchase, traffic for cash games rose as much as 10 percent, highly attributable to PokerStars’ December Festival events. Milestone Hands, one of the tournaments of the December Festival, is witnessing a high turnaround.

 The aftermath of the deal

Currently, PokerStars has an average of 21,000 ring game players and enjoys the second highest player traffic. Amaya’s Full Tilt occupies the fourth place with an average of 1500 players, behind 888Poker and iPoker which at 2400 payers and 2000 players respectively.

In November, Amaya posted its third-quarter revenue that surged $38.6 million to $239 million, compared with a year earlier. The Montreal-based company’s adjusted profit rose 10 times to $70 million, or $0.43 per share surpassing average analysts’ expectation of $0.15 per share. Amaya said it expects even stronger results in the next quarter due to increase in traffic in December.

Even though there are a number of challenges and barriers ahead of Amaya relating to its latest acquisition, the results and traffic reveal that Baazov’s brave move was rewarding. However, whether it will remain rewarding in the long run is yet to be seen.