The biggest transaction in this history if iGaming was concluded last week when Canada’s Amaya Gaming Group bought the Rational Group, the parent company of the industry’s leading iPoker site, PokerStars for .9 billion. The deal, which had been rumored over the past month, gives Amaya the world’s most successful online poker site, in addition to the intellectual property and software that has made PokerStars such a success. The deal also includes Full Tilt Poker, which Rational bought after the company after it was forced to close down following the “Black Friday” April 15, 2011 indictments by the U.S. Department of Justice.
As a result of the deal, the former Chairman Isai Sheinberg, who was indicted on serious federal crimes related to racketeering and money laundering, and his son, current Chairman Mark Scheinberg, will both step away from PokerStars. This action removes the impediment to PokerStars being licensed in legal U.S. jurisdictions. While the company will continue to be barred from Nevada because of the “bad actor” clause in its legislation, New Jersey may reconsider licensing the company. The PokerStars application had been suspended by the state’s Division of Gaming Enforcement, which had called for divestiture by Mark Scheinberg and “certain PokerStars executives.”
David Baazov, CEO of Amaya, has been quietly building an industry powerhouse over the past several years, but this acquisition vaults the company to the top shelf of gaming suppliers.
“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,” said Baazov. “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.”
Sheinberg, who announced in a private email to company employees that he would be stepping down and his father would be separating himself for all Rational responsibilities, talked about what it means to his company.
“I am incredibly 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,” he said. “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.”
Amaya already has some software that is currently being used on the legal online gaming jurisdiction of New Jersey. Therefore, the company is licensed there and believes that the process to introducing PokerStars to the market should be seamless.
“Amaya believes the transaction 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.,” the company said in a press release. “Additionally, Amaya will provide an extensive selection of its online casino games to expand the nascent Full Tilt Poker casino platform. Amaya intends to strongly support Rational Group’s growth initiatives in new gaming verticals, including casino, sportsbook and social gaming, and new geographies.”
The purchase of PokerStars is a big reach for the much smaller Amaya. The company is being extended a $2.1 billion credit line, as well as a senior secured second lien term loan fully underwritten by Amaya advisors Deutsche Bank, Barclays and Macquarie Capital. Although the deal saddles Amaya with a substantial debt load, the company isn’t worried about repayment.
“The combined company’s significant cash flow should allow for rapid debt repayment and provide Amaya with sufficient liquidity and flexibility to support ongoing growth prospects,” Amaya’s press release said.
The deal includes several live poker tours operated by Rational, including the European Poker Tour, PokerStars Caribbean Adventure, Latin American Poker Tour and the Asia Pacific Poker Tour, along with branded poker rooms at casinos such as the Hippodrome in London and Casino Barcelona in Spain.
Chris Grove, editor of OnlinePokerReport.com, speculated that the deal could be a precursor of an interest by Caesars Entertainment to obtain the company or license the software.
Grove bases his opinion on an existing relationship between Caesars and Amaya to supply content for Caesars’ online casinos in New Jersey (not to mention buying slot machines from Amaya subsidiary, Cadillac Jack).
Caesars also has not been happy with the WSOP platform in Nevada and New Jersey, even though it has the large part of market share in both states, and that Caesars’ agreement with 888 to use that platform has a “shelf life” and that Caesars would be looking to upgrade to the PokerStars or FullTilt platforms. Grove says Caesars needs online gaming to work and could be ready to make a deal.
As for licensing in New Jersey, where PokerStars has an agreement with Resorts Atlantic City, Division of Gaming Enforcement Director David Rebuck said Amaya’s participation is positive.
“The division is aware that current New Jersey authorized internet gaming provider, Amaya Gaming Group, is acquiring the assets of PokerStars,” he told John Brennan from the Bergen Record. “Regulatory integrity is always paramount to the division and we will review all aspects of this acquisition to ensure compliance with our high regulatory standards. We are also encouraged by this development and the expanded opportunities it might provide for New Jersey’s internet gaming industry.”
A bill that would legalize iPoker in California is a bit more problematic. The “bad actor” clause in that bill would prohibit both operators and suppliers who were involved in accepting bets from the U.S. after 2006, when the Unlawful Internet Gambling Enforcement Act took effect. PokerStars is not eligible under this definition, and unlike Nevada, which imposed a five-year “penalty box,” the California ban is forever.
