Amaya to Acquire Rational Group for $ 4.9 Billion

Amaya PSAfter months of speculation from the poker community, it’s now official… Oldford Group Limited, parent company of Rational Group, owner and operator of PokerStars and Full Tilt Poker, is being acquired by Amaya Gaming Group.

The total purchase price is $ 4.9 billion. The boards of directors of both Amaya and Oldford Group unanimously approved the agreement.

The addition of privately held Rational Group, recognized as the world’s largest online poker business, will make Amaya Gaming the largest publicly traded online gaming company in the world. As stated in the joint press release, the transaction combines complimentary businesses with minimal overlap:  Isle of Man headquartered Rational Group’s B2C poker business including PokerStars, Full Tilt Poker, live poker tours and events, and online and TV poker programming, and Montreal headquartered Amaya’s B2B interactive and physical casino and lottery gaming solutions.  The combined pro forma revenue and EBITDA for calendar year 2013 of Amaya and Oldford Group were $ 1.3 billion and $ 474.8 million respectively.

Under terms of the transaction, shareholders of Oldford Group, led by CEO Mark Scheinberg, will dispose of their shares to a wholly owned subsidiary of Amaya. Scheinberg and other principals of Oldford Group will resign from all positions with Oldford Group and its subsidiaries upon completion of the sale.   

The new entity will retain Rational Groups executive management team and online poker services provided by PokerStars and Full Tilt Poker will be unaffected by the transaction, with players continuing to enjoy uninterrupted access to their gaming experience.

The transaction will be financed through a combination of cash, new debt, a private placement of subscription receipts, a private placement of common shares and a private placement of non-voting convertible preferred shares.
Affiliates of GSO Capital Partners LP, the credit division of the Blackstone Group, have agreed to participate in the debt financing, to subscribe for $ 600 million in convertible preferred shares, and to purchase $ 55 million of common shares of the Corporation with each common share priced at Canadian $ 20 upon closing of the deal. An investment manager, on behalf of its clients, has agreed to participate in the debt financing, to subscribe for approximately $ 270 million in convertible preferred shares and to purchase approximately $ 55 million of subscription receipts.

Under the terms of the agreement, a wholly owned subsidiary of Amaya will pay $ 4.9 billion to the holders of Oldford Group securities, which amount will be satisfied by a $ 50 million deposit made on the date of the signing, and a cash payment of $ 4.45 billion at closing, as adjusted in accordance with debt and working capital provisions set out in the agreement, and with a deferred payment of $ 400 million which shall be subject to adjustment, payable upon the earlier of July 31, 2017 or 30 months following closing of the transaction, based on the occurrence of certain events.  If the agreement is terminated prior to closing, under certain circumstances, Oldford Group will be entitled to retain the $ 50 million deposit, which may be increased by increments of $ 10 million under certain circumstances.

Amaya believes the acquisition will expedite the entry of PokerStars and Full Tilt Poker into regulated markets in which Amaya already holds a footprint, particularly the U.S.A.  Additionally Amaya will provide an extensive selection to its online casino games to expand the Full Tilt Poker casino platform.  Amaya further intends to strongly support Rational Groups growth initiatives in new gaming verticals, including casino, sportsbook and social gaming, and new geographies.
Amaya already has an expansive footprint in regulated markets in the USA, Canada and Europe through its provision of its online, landbased and lottery solutions to licensed commercial, tribal and charitable gaming operations, as well as government lotteries and gaming control agencies.

Amaya CEO David Baazov said “This is a transformative acquisition for Amaya, strengthening our core B2B operations with a consumer online powerhouse that creates a scalable global platform for growth”. He continued, saying “Mark Scheinberg pioneered the online poker industry, building a remarkable business and earning the trust of millions of poker players by delivering the industry’s best game experiences, customer service and online security.  Working with the experienced executive team at Rational Group, Amaya will continue that tradition of excellence and accelerate growth into new markets and verticals.”

Rational Group’s core business is PokerStars which launched in 2001. Since that time, PokerStars has become the world’s largest online poker site, hosting the most players, offering the largest prize pools and the greatest variety of poker games to millions of players.  PokerStars set a new Guinness World Record in June 2013 when 225,000 players competed in a single online poker tournament. Together with Full Tilt Poker, Rational Group holds a majority of the global market share in real money online poker and is a leader in almost every regulated market in which it operates.  Rational holds online poker licenses in 10 jurisdictions, more than any other gaming company.  Rational is also the world’s largest producer of live poker events and poker programming for television and online audiences.

Rational Group CEO Mark Scheinberg said “I am extremely proud of the business Isai and I have built over the last 14 years, creating the world’s biggest poker company and a leader in the iGaming space.  Our achievements and this transaction are an affirmation of the hard work, expertise and dedication of our staff, which I am confident will continue to drive the company’s success.  The values and integrity which have shaped this company are deeply ingrained in its DNA.  David Baazov has a strong vision for the future of the Rational Group which will lead the company to new heights.”
Trading in Amaya stock was temporarily halted yesterday after seeing an increase of more than 29% over the last few days, following rumors an announcement was imminent. In addition, Amaya’s annual and special meeting of its shareholders will now be held on July 30, 2014 rather than June 17 as previously announced. At that meeting, the shareholders will be asked to consider and approve the creation of the new class of convertible preferred shares.  Such a creation will require approval of two thirds of the votes cast by shareholders present at the meeting. Shareholders registered by close of business on June 11, 2014 will be entitled to vote at the meeting.

 

 

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