Canadian gaming supplier Amaya, Inc. last week announced the completion of the sale of its Georgia-based slot manufacturing subsidiary Cadillac Jack to rival slot-maker AGS, now an affiliate of hedge fund Apollo Global Management. The company also confirmed that Quebec’s Autorité des marchés financiers had launched an investigation of the company’s CEO and CFO.
Pursuant to the previously announced stock purchase agreement, AGS has purchased all of the shares of Amaya Americas for an aggregate purchase price of approximately $476 million, comprising cash consideration of approximately $461 million and a $15 million payment-in-kind (PIK) note, bearing interest at 5% per annum and due on the eighth anniversary of the closing date.
Proceeds from the transaction were used to help repay in full Cadillac Jack’s debt and other associated costs.
“Cadillac Jack has expanded its business greatly under Amaya’s ownership to the credit of its management and its employees,” said Amaya Chairman and CEO David Baazov. “It has enhanced its operational efficiencies and expanded its business both geographically, including acquiring multiple U.S. state commercial licenses, and by markets, including expansion in Class III and online gaming. We anticipate its combination with AGS will expedite the company’s growth strategy.
“We are extremely pleased that we have been able to crystallize on the value that has been created within Cadillac Jack over the past two-and-a-half years for the benefit of our shareholders,” added Baazov. “The transaction results in both a strong return on our investment and a significant deleveraging event that puts us on the path to achieving our previously guided adjusted net leverage ratio of 4.0 to 4.5 by the end of the year. It is also consistent with our strategy to focus on our primary growth platform, our core B2C operations.”
Macquarie Capital and Deutsche Bank Securities Inc. acted as Amaya’s co-financial sales advisors.
The announcement by Quebec’s Autorité des marchés financiers has confirmed that both CEO David Baazov and CFO Daniel Sebag were under investigation for possibly violating Canadian gaming law in completing the $4.9 billion acquisition.
The investigation flies in the face of one of the key reasons PokerStars was sold to Amaya—namely to remove the stigma of past legal troubles in the U.S. for the company. However, under Amaya, PokerStars has continued to face a long battle as it tries to become licensed for online gaming in New Jersey and has not been cleared by that state’s gaming regulators.
Investigators want to know if the proper legal processes was followed during the negotiation and acquisition of PokerStars, according to reports.
Amaya Gaming has confirmed that confirmed that Baazov and Sebag are under investigation by Quebec authorities but stated that the company followed proper legal procedures and are confident the investigation will confirm that.
In a statement, David Baazov said “I believe that any concerns that I or other Amaya officers or directors violated any Canadian securities laws are unfounded and we are confident that at the end of its investigation, the AMF will come to the same conclusion,” Baazov said in a press statement.
In December 2014, the AMF used search warrants to visit a number of Amaya Gaming’s offices including the Canaccord Genuity and Manulife Financial and the company’s headquarters in Montreal, Canada but reportedly did not find any conclusive evidence against Amaya.
