Amaya Inc. says it has received a non-binding proposal from its CEO, David Baazov, to purchase the company for C$21 per share. If accepted, the proposed value of the deal would be C$4.39 billion, which is $3.13 billion in American dollars. That value is based on a fully diluted share basis, as of September 30.
On news of the buyout offer, Amaya's US shares climbed 22% to $12.88 in premarket trading. Based on the current basic share price, the proposed offer values Amaya Inc. at about C$2.8 billion, which is a premium of roughly 40% to its Friday close on the TSE.
David Baazov's Shares
The 34-year old David Baazov currently owns 24.6 million common shares of Amaya Inc., with an option to buy 500,000 more shares. He owns about 18.6% of the common shares of the Montreal-based company, which he founded.
In June 2015, David Baazov, Amaya CFO Daniel Sebag, and an unnamed manager were investigated for trading in the company's stocks prior to the announcement of his company's $4.9 billion takeover of Rational Group, which is the owner of PokerStars. Three Canaccord Genuity Securites employees and 15 Manulife Securities employees are also under investigation for similar suspicious trading in the same case.
Takeover of PokerStars
When the takeover happened in the summer of 2014, it was shocking news. The Scheinburg family which founded PokerStars were thought to have no significant interest in selling the world's largest online poker site. The Rational Media purchase was backed by GSO Capital Partners, the credit division of Blackstone Group LP's (BX.N).
The announcement comes after several financial setbacks were announced for Amaya Inc. In November 2015, the company announced it would have disappointing profits, due to delays in the launch of the company's sportsbook and the strengthening of the U.S. dollar.
Victiv Takeover
Amaya's purchase of the daily fantasy sports site, Victiv, and its conversion into DFS competitor StarsDraft was seen as ill-timed. The Victiv buyout occurred in June 2015, only 3 months before a scandal involving the top two DFS sites, DraftKings and FanDuel, put the one-day fantasy sports industry in jeopardy. Since then, Amaya has announced StarsDraft would not accept real money play in most US states, which all-but-kills the value of Victiv.
$870 Million Kentucky Judgment
Last month, a Kentucky judge announced a $870 million judgment against PokerStars. The judge determined the poker site had cost Kentucky online poker players $290 million in the years PokerStars defied the UIGEA and continued to accept American real money play. Then the judge used an arcane Kentucky law to triple the damages he had assessed. PokerStars is likely to be in litigation in Kentucky for years, based on that judgment. Over the past 12 months, Amaya Inc. shares had fallen 55% on the Toronto Stock Exchange.
In announcing the proposal, David Baazov said Amaya Inc.'s board of directors has set up a special committee of independent directors to review Baazov's proposal. The specific wording of the announcement was the special committee would review "any proposal that may be forthcoming, as well as other alternatives that may become available to Amaya."
No Word on the Backers' Identity
Craig Levitt, one of the original Amaya investors and a notable Montreal businessman in his own right, said he is not one of Baazov's backers. Not only is Levitt not a part of the deal, but he said he has received no indication of who might be bankrolling the buyout. He said flatly, "I have no idea."
Levitt did say Baazov's decision to buy back Amaya Inc. stock sounds like a rational decision. He said shares of the company sounded undervalued, so a buyout makes sound financial sense. Levitt said a buyout is the "logical thing to do. I think the stock is undervalued. When people see a stock as undervalued, why not take it private?"
Maher Yaghi Estimates
Desjardins Securities analyst Maher Yaghi sent a message to investors on Monday analyzing the move by David Baazov. He addressed the common assumption that the move is opportunistic by saying, "It is worth pointing out that the continued strength in the US dollar is a potential headwind for the company’s European poker business. In addition, the company’s elevated leverage in an environment of increasing credit spreads is another factor for shareholders to consider."
Maher Yaghi said the his company values Amaya shares to be worth C$28.50. If that is the case, then David Baazov and his backers would be purchasing Amaya Inc. shares at quite a discount.
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