Montreal-based Amaya Gaming confirmed that it had received a CAD$3.5 billion buyout offer (USD$2.58 billion) from former CEO David Baazov during its third quarter earnings conference call Monday morning.
“We acknowledge receipt of an all-cash offer from David Baazov,” said Rafi Ashkenazi, Amaya’s current chief executive. He added that the board would consider the offer and provide a response within five business days, but offered “no assurance that the offer will result in a completed transaction.”
Baazov, who currently has a 17 percent stake in Amaya, offered to purchase the remainder of the company at CAD$24 per share, representing a 31 percent premium over Friday’s closing price of CAD$18.34.
Baazov made a similar offer in February 2016 to purchase the remainder of the firm for CAD$2.8 billion. That deal fell through, however, when he was charged in March with exchanging insider information for financial kickbacks by Quebec’s provincial securities regulator, resulting in his taking a leave of absence.
Ashkenazi declined to comment on the charges or the ongoing investigation during the earnings call.
Amaya was also in buyout talks with William Hill that ultimately collapsed in October due to a lack of investor support.
For the third quarter, Amaya reported a 9.5 percent year-over-year increase in net revenue to USD$270.8 million and a 14 percent jump in adjusted EBITDA to $123.2 million. When factoring in foreign exchange fluctuations and a decline in purchasing power for customers converting their deposits to U.S. dollars, the company said that total revenues for the quarter would have increased 11.7 percent.
Revenues from Amaya’s poker operations, including its flagship PokerStars brand, were largely stagnant year-over-year when factoring in foreign exchange variance despite a 7.8 year-over-year decline in July. However, the company’s upstart online casino and sportsbook verticals posted strong growth and represented 24 percent of total revenue for the quarter, up from 15 percent for the third quarter in 2015.
“I am particularly pleased with our core poker business as we believe the proactive changes we made to our poker ecosystem have both substantially offset and began to reverse certain negative trends facing that business,” said Ashkenazi. “We plan to continue leveraging this positive momentum into our casino and sportsbook offerings as we focus on becoming the world’s favorite online gaming destination and maximizing winning moments for all of our customers.”
The company also reported a 5 percent year-over-year increase in active unique users to 2.4 million, 1.9 new customer registrations and a 7 percent increase in quarterly net yield (per user) to $114 when factoring in foreign exchange impacts. Amaya now maintains an estimated 71 percent share of global the online poker market.
In response to analyst questions, Ashkenazi also expressed optimism that the results of last week’s presidential election will be beneficial to the expansion of online gaming in the U.S.
“I’m not sure how exactly the U.S. elections are going to impact our business – it’s premature,” he said. “We do know that Donald Trump has made positive comments on online gaming in the past. We hope that he will retain his word.”
Amaya currently derives just 13 percent of its overall revenue from the Americas, compared to 63 percent from the European Union and 17 percent from the rest of Europe.
Amaya also announced that it had concluded an internal strategic review during the quarter intended to review its expense structure and identify other means to enhancing shareholder value. This has resulted in office restructurings and personnel reassessments around the globe, though the company does not “expect a significant net reduction in headcount by the end of 2016,” it said in a press release.
“As we have concluded the strategic review process, we are excited to continue focusing on improving the company and our operations. We continued to execute on our four strategic priorities during the quarter as evidenced by our strong performance,” said Ashkenazi.
Ashkenazi added that the two primary takeaways of the review were that while Amaya maintains a strong overall business model, it must do a better job of communicating its message and vision to stakeholders – including customers, investors, financial analysts and the media.
He expressed optimism that Amaya’s further diversification into online casino – it now offers roughly 200 slot games – and online sportsbook, particularly on the mobile technology front, will serve as drivers of revenue growth and new customers moving ahead.
The company updated its 2016 full year guidance for net revenues – from $1.137 billion to $1.157 billion, adjusted EBITDA – from $500 million to $510 million, and earnings per share from $1.78 to $1.83.
For 2017, Ashkenazi said that the Amaya’s major initiatives will include a rollout of new VIP and loyalty programs. It will reduce its market expansion efforts in favor of continued refinement of its casino and sportsbook platforms and a concomitant expansion in marketing efforts predicated on building upon PokerStar’s status as the world’s most licensed and recognized online brand.
“We intend to continue using this leadership position in poker to ultimately achieve leadership in our other verticals,” said Ashkenazi.
