Amaya CEO David Baazov Makes $2 Billion Proposal to Buy Entire Company
In breaking news Monday morning, Amaya Gaming, parent company of PokerStars and Full Tilt, announced that Amaya CEO David Baazov is planning on making an all-cash offer to acquire the company he leads. According to a press release from Amaya, the price Baazov proposes is CAD $21.00 per share, which would put the total value of the deal at CAD $2.8 billion (approximately USD $2 billion).
The press release from Amaya reads as follows:
Montreal, Feb. 1, 2016 – Amaya Inc. (NASDAQ: AYA; TSX: AYA) confirmed today that it has received a non-binding indication from its Chairman and Chief Executive Officer, David Baazov, that he intends to make an all-cash proposal to acquire Amaya at a price currently estimated by Mr. Baazov to be C$21.00 per common share. The board of directors of Amaya has established a special committee of independent directors to review any proposal that may be forthcoming, as well as other alternatives that may become available to Amaya. Amaya’s Lead Independent Director, Dave Gadhia, will chair the special committee.
As of the time of this release, the special committee has neither received nor solicited a formal bid or offer related to a potential transaction and there can be no assurance that Mr. Baazov’s intention will result in a formal bid or offer or that any such bid or offer will ultimately result in a completed transaction.
Shareholders of Amaya do not need to take any action with respect to any potential proposal at this time. Amaya intends to provide updates if and when necessary in accordance with applicable securities laws.
According to a Reuters article, Baazov owns 24.6 million shares of Amaya, or about 18.4 percent of the company. Assuming he doesn’t have to re-buy his own shares, that would leave 108,826,000 shares not in his hands, an amount that would cost Baazov CAD $2.285 billion to purchase at the $21 proposed share price. He also has options for another 550,000 common shares.
Amaya Gaming CEO David Baazov
Image source: CantechLetter.com
The news sent Amaya’s stock price soaring on Monday. It closed Friday at CAD $14.99 per share on the Toronto Stock Exchange and jumped 27 percent in the first minute of trading this morning. At the time of this writing, Amaya, Inc. (AYA) shares are still up 25.42 percent to $18.50 per share.
Baazov’s proposal represents a 40 percent premium over Friday’s closing price. And it is that closing price that many are speculating as the reason why Baazov is making this move right now. Amaya’s stock had been relatively flat prior to the company’s purchase of PokerStars in 2014, but soon thereafter, the stock began to take off, reaching nearly CAD $39 per share in late 2014. It was up and down in the $20’s and $30’s during 2015, but has been on a severe downward trend for months, falling to its lowest point last week just prior to Baazov’s possible PokerStars purchase announcement.
Baazov may be looking at the stock as an amazing deal right now, so even paying a hefty premium may be a good investment.
Maher Yaghi, an analyst with Desjardins Capital Markets, told Bloomberg Business that he believes Amaya is undervalued, as his estimate puts the value of a share of Amaya at CAD $28.50. He also noted, “While some could see the offer as potentially being opportunistic, it is worth pointing out that the continued strength in the U.S. 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.”
Alexandre Dreyfus, CEO of Mediarex Sports & Entertainment, which is best known for its ownership of the Global Poker Index and the upcoming Global Poker League, applauded David Baazov’s potential move in an article on LinkedIn today. He sees the purchase and subsequent privatization of Amaya as a great way to help the company – and PokerStars, in particular – grow. The shackles of public ownership gone, Amaya can feel free to innovate without having to appease shareholders and their desire for an ever-growing stock price.
Said Dreyfus:
The acquisition of Pokerstars by Amaya in 2014, was obviously a debt-backed operation, but it was through a public listed vehicle, which most of the poker industry experts were saying “He will have to shut-down Canada, Russia and some were even saying Germany”. Well, “he” didn’t. While the company is leading the poker market with +70% market-share, the growth of revenue has been limited and paradoxically the ability to invest and innovate into the poker vertical, was clearly limited because the priority was to pay back the debt AND please the analysts.
“Pokerstars has enough funds to invest, but had the obligation to show analysts immediate return,” Dreyfus added. “It was impossible to develop a long-term strategy, everything was focus on: Q1, Q2, Q3 and Q4. The management was not driven by long-term approach, but by short term return. It was frustrating. It was legit, but it doesn’t help poker, and those who love that industry.”
As the press release notes, no formal offer has been made by Baazov yet; this is just in the non-binding proposal stages.
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