Amaya acquires PokerStars, but where’s the money coming from?

100billion-hand_orig_full_sidebarIn a move which seems to defy basic arithmetic, a Montreal-based company by the name of Amaya has, in a single bite, acquired PokerStars, Full Tilt Poker and their umbrella company, the Oldford Group. Unsurprisingly, the poker world is freaking out. The first question on everyone’s lips is what this means for online poker players, but perhaps a more interesting question is how this even happened.

What it means for players is probably very little, at least in the short term. Amaya is stressing that, although the Oldford Group is essentially being dissolved, with its shares going to a subsidiary of Amaya and its principals resigning, the executive management team of Rational Group (who are in charge of PokerStars and Full Tilt) will be unchanged, and the sites will continue business as usual. They promise that players’ access to and experience of these sites will remain undisturbed, and there’s no reason to doubt this promise. In terms of visible impact, the most likely change brought about by the deal will be to facilitate PokerStars’ entry into the US market.

So, who are Amaya? If you’ve never heard of them before, you’re not the only one. They’re a business-to-business company operating in the digital gambling sector, producing slot machines, offering IT services to gambling websites and so forth. But here are the most important facts about the deal: prior to it, Amaya was valued at about $177 million and they are buying the Oldford Group for $4.9 billion. At first glance, this sounds like an absurdity – a mouse swallowing an elephant. Where has Amaya found that kind of money?

Their press release provides some, but not all of the answers: $2.9 billion is being lent by Deutsche Bank, Barclays Bank and Macquarie Capital, who are presumably comfortable that Amaya will be able to pay off these debts with their newfound income from the properties. Approximately another $1.7 billion is being raised by the private sale of new shares, and the rest – which still amounts to more than Amaya’s book value – is being paid out of pocket.

Obviously, for a company Amaya’s size to raise $1.7 billion through issuing new shares, they have to be issuing a whole lot of shares; a lot more than they had to begin with. In other words, it is effectively the purchasers of these new shares who are really buying Oldford Group, rather than Amaya. $655 million worth are going to GSO Capital Partners LP, but the other billion plus are going to persons or organizations unnamed.

On top of this, Amaya is also giving away 12.75 million share purchase warrants (effectively stock options allowing shares to be purchased at a penny apiece) to GSO and to an unnamed investment manager as payment for brokering the deal. At an initial price of $20 a share, which will likely go up in time, these payments effectively amount to $255 million.

Putting all of this together, it seems likely that the initiators of the deal are GSO, the unnamed investment manager, and the principals of the Oldford Group. Amaya seems more like a tool of convenience to allow them GSO and the mystery investors to purchase Oldford indirectly. They probably have their own reasons for wanting to do so, perhaps to ensure that it will be Amaya’s board of directors rather than any of them who take the fall if PokerStars and Full Tilt find themselves in any further legal difficulties. As for why they chose Amaya specifically, that’s anyone’s guess, but Montreal is a convenient geographical location, being a hub for the tech and digital gaming industries, and now suddenly a hotspot for poker as well, with the appearance of the Playground Poker Club, the newest big stop on the World Poker Tour.

Again, in all likelihood, PokerStars and Full Tilt players will see no immediate effect from this reorganization. Whether the parties involved have bigger plans for the long term remains to be seen, but it will be an interesting story to keep tabs on.

Alex Weldon is a game designer by day and poker tournament wizard by night. You can read more from Alex at and follow him on Twitter at @benefactumgames

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