Amaya Gaming has recently released a “Management Information Circular” in preparation for their “Annual and Special Meeting of Shareholders” scheduled for July 30, 2014 in Montreal.
The principal purpose of the 90-page-plus-appendices document (actually a 257-page PDF that you can peruse for yourself here) is to provide shareholders with information for the upcoming meeting where they will be tasked with voting on the proposed plan for acquiring financing for their acquisition of Rational Group (read as: PokerStars and Full Tilt Poker), as well as to go about the usual corporate business typical of an annual meeting.
You will recall that it was announced a month ago that Montreal-based Amaya Gaming had entered an agreement to acquire Rational Group for $4.9 billion-with-a-b. Whether or not that deal actually goes through could depend on the outcome of the vote to occur at this upcoming shareholder meeting.
In the opening letter within the document, David Baazov, President and CEO if Amaya Gaming, urges the shareholders to “vote IN FAVOUR of the Acquisition Financing Resolutions ... The Acquisition and Acquisition Financing cannot be completed unless the Acquisition Financing Resolutions are duly approved by the Shareholders at the Meeting.”
This document reveals a lot more of the details surrounding this enormous deal. The acquisition has been positioned as a merger, rather than an outright purchase. Amaya Gaming is using a subsidiary company that they wholly own called Mergerco (clever) that will merge with Oldford (Rational Group’s parent company) and Oldford will be the surviving company, making Oldford a wholly-owned subsidiary of Amaya Gaming. The Oldford shareholders will receive $4.9 billion for the merger, $50 million of which Amaya Gaming has already put down as a deposit.
The transaction is expected to be completed during the third quarter of 2014, but can be extended to as long as the end of 2016. There is an absolute deadline set at December 31, 2016 for the transaction to be completed.
However, there is still a possibility of terminating the agreement by either party.
In order for Amaya Gaming to acquire the much larger Rational Group, significant debt has to be taken on. The $4.9 billion will be comprised of loans and revolving credit worth $2.9 billion, $1.05 billion through issuing “Preferred Shares”, $640 million of “Subscription Receipts”, and $55 million in “Common Shares”. This is what the shareholders will be voting on at the July 30 meeting: whether or not they agree to the terms of the financing.
Further discussion of “new verticals” appears in the document. It has already been made known that Amaya Gaming intends to use its online casino game assets to add additional avenues of revenue to PokerStars and Full Tilt Poker. Many players have hoped that this will only apply to Full Tilt Poker and PokerStars will remain only a poker site, but there seems to be no suggestion that it will be left untouched. The document states:
In addition to continued organic growth in poker in its existing markets, Oldford has significant untapped opportunities for growth. Introduction of online real money casino and/or online sportsbook in those markets where permitted, are new opportunities for cross selling to its existing poker player base. There is typically significant crossover between poker players and those who participate in online casino and sportsbook, and Oldford’s large player base will be of significant value in introducing these alternatives. Other opportunities such as social gaming and non-gaming verticals that leverage the significant player base will also be explored.
What is distinctly absent in this extensive report is any mention of losing any existing markets. This document seeks to inform its shareholders of every aspect of what this deal entails including the benefits to be found in the future, the potential risks, etc. If there was any possibility that the acquisition would cause PokerStars and Full Tilt Poker to cease operating in a healthy market like Canada, as some have worried, Amaya Gaming would certainly know about it and be forced to inform its shareholders of this repercussion prior to this important upcoming vote. The lack of such information suggests there may really be nothing to fear for Canadians who play on the two largest poker sites.