Digging Deeper into Amaya Gaming and PokerStars Deal

June 16, 2014
Digging Deeper into Amaya Gaming and PokerStars Deal

There are several interesting aspects of the deal struck by Amaya Gaming to acquire PokerStars.  These are some facts on the deal taken from the press release:

  • $4.9 billion sale price
  • $2.9 billion is loans written by several international investment banks
  • $400 million deferred payment due July 31, 2017
  • $1.642 billion financed through convertible preferred stock and subscription receipts
  • Largest iGaming transaction in history
  • PokerStars principals will resign if deal closes
  • Must be approved by Amaya Gaming shareholders
  • Already approved by boards of directors of Amaya Gaming and PokerStars
  • PokerStars 2013 cash flow was $317 million
  • Sales price 15.5 times cash flow and 11.1 times EBITDA
  • $50 million deposit that may be kept by PokerStars under certain conditions
  • Deposit may increase in $10 million increments
  • Deal hopes to close on or about September 30, 2014
  • No mention of which company would pay for the $97 million due in 2015 to Department of Justice related to Black Friday settlement

Live Gaming Valuation Comparison
The $4.9 billion price for PokerStars makes it one of the most valuable gaming companies in the world, even when including traditional live casinos. Below is a list of publicly traded gaming companies and the market cap based on the close of trading on June 13, 2014.

  • Boyd Gaming – $1.31b
  • Pinnacle – $1.51b
  • Bally Technologies – $2.5b
  • Caesars Entertainment – $2.6b
  • IGT – $3.92b
  • MGM Resorts – $12.2b
  • Wynn Resorts – $20.27b
  • Las Vegas Sands – $60.11b

Online Gaming Company Valuation Comparison (Converted to USD)

  • 888 – $704 million
  • Bwin.party – $1.5b
  • Playtech – $3.1b

Amaya Gaming/PokerStars Speculation

There have been several items of speculation among players and industry followers. One concern is that PokerStars would be forced to leave the Canadian market. This conclusion has been drawn by past Canadian companies or those that do business with provincial lotteries not accepting action from players in the country. The company being publicly traded in Canada adds more fuel to this speculation.

Amaya Gaming does not restrict Canadian players on its Ongame platform. On the other hand, it is not a direct marketer or payment processor for those players either. Steve Day of PokerStars has stated that there are no plans to leave the Canadian market at this time. That has not silenced the rumor mill.

Casino Games and Sports Betting

Another thought is that PokerStars may add casino games and sports betting after this sale. Full Tilt Poker already spreads these games. Amaya Gaming already supplies the casino content for Full Tilt Poker. PokerStars hinted that this may be possible.

Bad Actor Still in Play?

The bad actor debate may not be not resolved by this transaction. States that still have these clauses in bills could cause the new company problems. That is because intellectual property, including trade names, logos, software, and player databases, are all covered by the bad actor language. There are several scenarios where this situation may be improved.

Amaya Gaming could develop new software and rebrand the PokerStars unit for a U.S.-facing business. Another thought is that Amaya Gaming is already on great terms with several U.S. casino companies. Amaya powers the casino business of several New Jersey companies. It also operates free play poker platforms. The removal of current PokerStars management and owners may help lower the opposition created by some companies that would prefer to see PokerStars out of the U.S. market permanently.

A large casino company joining forces with Amaya Gaming may be enough to give the U.S. facing future of PokerStars new life. Ideally, Amaya Gaming can just defeat bad actor clauses during the legislative process, or alternatively, prevail in court after challenging the bill if it becomes law.

New Jersey does not have a bad actor clause. The New Jersey Division of Gaming Enforcement is encouraged by this news. The license application is currently in a two year suspension.

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