What Happens To PokerStars If Amaya And William Hill Merge?

October 11, 2016
What Happens To PokerStars If Amaya And William Hill Merge?

A $4.9 billion takeover deal between Amaya and PokerStars was consummated back in 2014. The deal gave control of PokerStars and all its assets to Amaya, a Canadian B2B company valued at a mere fraction of the company they acquired. The deal also took PokerStars, a then-private company, public.

Now, just two years later, Amaya is once again considering its options, weighing potential deals with at least two other online gaming giants, GVC and William Hill, and William Hill appears to be the more likely buyer.

A potential all-stock merger/acquisition of Amaya by William Hill was first reported by Reuters, and later confirmed in a joint press release by William Hill and PokerStars:

“Amaya has been undertaking a review of its strategic alternatives since February 2016. Over recent months, the Board of William Hill has been evaluating options to accelerate William Hill’s strategy of increasing diversification by growing its digital and international businesses.”

“The potential merger would be consistent with the strategic objectives of both William Hill and Amaya and would create a clear international leader across online sports betting, poker and casino.”

Baazov ends takeover attempt

This isn’t the first time Amaya has considered a prospective takeover deal since acquiring PokerStars.

In February, Amaya CEO David Baazov floated the idea of an all-cash offer for Amaya. (Amaya has since severed ties with Baazov, who is facing insider trading charges.)

“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.”

According to the recent Reuters report, Baazov has officially abandoned his attempts to purchase the company and take it private.

Amaya’s wild ride

In the two years since Amaya took control at PokerStars, the company’s business model has undergone a paradigm shift.

During its time at the helm, Amaya:

  • reshaped and reimagined PokerStars. The longtime status of PokerStars as a poker-only company quickly vanished with the addition of online casino and sports betting.
  • completely overhauled the distribution of rewards and rake structures at the site, and for the first time, the company became a pariah in the poker community.
  • was rocked by scandal, when the company’s now-former CEO came under fire from Canadian regulators for alleged insider trading.
  • secured a New Jersey online gambling license in October 2015 and launched a licensed online poker site in the Garden State in March, something PokerStars was unable to do under the Scheinbergs‘ stewardship.

Some of these changes have raised the ire of the company’s existing customer base, but are seen internally as necessary steps for long-term solvency by the company.

The reality of the situation is this: PokerStars’ original owners were willing to sacrifice the bottom line to make sure the company was thought of as best-in-class by the poker community. This practice was discontinued by Amaya, as the company sought to redirect what appeared to be a drifting ship, where the ecosystem had grown imbalanced, with too many of the company’s marketing dollars going to a small sliver of top players.

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What direction would William Hill/Amaya take PokerStars?

If Amaya is absorbed into William Hill it would be a classic case of good news/bad news for poker players.

Poker no longer top dog

Professional players will likely feel even more ostracized, but PokerStars would have a smoother path to access new markets.

Even though it has added online casino and sports betting products, poker continues to be Amaya’s top vertical. A merger with William Hill would change this immediately, as William Hill’s sportsbook would be the company’s primary focus, causing online poker to fall even further down the new company’s priority ladder.

Access to new markets

At the same time, William Hill would likely help open doors to new markets and further cleanse the company of the residue of its original owners.

With the degrees of separation between the pre-Black Friday PokerStars and the current incarnation of the company growing, it becomes increasingly difficult to tag the company as a bad actor.

Amaya has an online gambling license in New Jersey, and William Hill is a licensed sportsbook operator in Nevada, which would make it even more difficult to keep the company out of California and other jurisdictions where the company’s past has been used against them.

Finally, a merger with Amaya (PokerStars is the most licensed online gambling company in the world) would also help William Hill expand its footprint, as the company is almost completely reliant on the UK, according to the company’s H1 2016 report:

“The Group’s strategy is to diversify our sources of revenue internationally, thereby reducing our reliance on the UK market and the impact of any fiscal, regulatory or economic changes. Today, 84% of revenues come from the UK and 16% from our international businesses, with more work to be done to take a more focused approach to international growth.”

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