There were rumors floating around all weekend that Amaya Gaming and PokerStars are in talks about a possible merger. This creates a lot of interesting scenarios. Most of them seem a bit farfetched.
Amaya Gaming owns the Ongame Network. It also provides casino content to many online casino operators. Several of these are in New Jersey. This makes Amaya Gaming an attractive acquisition target for a company looking to get into the regulated U.S. market. With that said, a marriage between Amaya Gaming and PokerStars is problematic.
PokerStars has been shut out of the U.S. regulated poker market up to this point. A bad actor clause in Nevada locked the door there. 888 was chosen over PokerStars in Delaware. Its gaming license application was suspended in New Jersey for two years or until major changes at the company are announced.
PokerStars and its partners hope to keep a bad actor clause out of the law in California. The group has alluded to possible legal action should legislation automatically lock PokerStars out of the state.
All of these potential licensing issues may have led PokerStars to try an alternative, according to rumors that were published on Calvinayre.com. I’m not sold on the gossip.
The speculation states that Amaya Gaming and PokerStars would be part of a reverse takeover or asset purchase. This could give Amaya Gaming, a publicly traded company, control of the PokerStars assets. At first glance, it would seem that PokerStars is worth substantially more than Amaya. PokerStars is privately held and could have debt on the books that is not known that would lower its value.
Assuming Amaya Gaming is worth less than PokerStars, and there is not enough cash on hand, financing would need to occur. Amaya Gaming would have to issue new shares or borrow cash. If a loan was needed, some of it may need to come from PokerStars’ equity holders. Either of these would create an interesting scenario.
PokerStars shareholders could either own part of the new company or hold debt that could be secured by the acquired assets. This might not resolve the ownership situation, depending on where the financing originated.
There is a potential problem with Amaya Gaming acquiring assets from PokerStars. In California, the bad actor clause that has been presented would consider software and player databases acquired from a company that accepted U.S. players after December 31, 2006, tainted.
Amaya Gaming services virtually every casino platform in New Jersey. It also owns the Ongame platform used by Betfair. Introducing PokerStars ownership into the equation before the company is approved could create a licensing conflict.
There is also a concern about the market share of PokerStars in Europe. PokerStars has about two-thirds of the share in markets that are not ring-fenced, according to stats published on PokerScout. It is more than ten times the size of the second largest poker site.
The market share is regulated countries is also substantial. The only one where PokerStars does not dominate is France, where Amaya’s Ongame also operates.
In this writer’s opinion, PokerStars has never shown any abuse of its dominant position. In fact, the company has shown that it is always open to feedback from players. PokerStars invites prominent players to the Isle of Man to help improve its customer support, pricing, and game availability. It also accepted player feedback in France when there was a boycott over pricing.
There is no reason to believe a merger with a company that owns a poker site less than 2 percent its size would change that. Competing online poker companies may claim otherwise and push for the European Union competition law to apply. This could cause substantial delays in a merger.
The Ongame platform could be dumped immediately to help with this issue. It took more than a year and a half for bwin.party to unload the network, referred to as a “surplus asset” at the time. It may be easier just to close the platform in this saturated market, should a merger actually occur.
There has been some speculation that the negotiations could actually be over the transfer of the Full Tilt Poker platform. That would make a lot more sense. Players tend to like the Full Tilt platform as much as the PokerStars one. Since Full Tilt was available in the U.S. after 2006, this may not resolve the tainted asset issue in states with bad actor clauses. The state-by-state approach makes this difficult to predict.
Amaya Gaming responded to the acquisition rumors through a 192-word press release. It could have been said in two words: “No comment”.
I would not be surprised at all if there were some sort of discussions going on between Amaya Gaming and PokerStars. These types of meetings occur frequently across all industries. With that said, I do not believe that we will see any sort of reverse takeover or asset shuffle between Amaya Gaming and PokerStars that involves a transfer of the coveted PokerStars platform and player base.