Amaya Responds to PokerStars Acquisition Rumors

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Recently, an article published by CalvinAyre set the poker industry abuzz with rumors that the Canadian firm Amaya Gaming would purchase the online poker behemoth PokerStars. But this week, perhaps hoping to quell the gossip, Amaya decided to release a statement that was seen as a tacit denial of the surprising report.

The first inkling of a deal came on May 16, when Industrial Alliance Securities analyst Neil Lindsell stated that Amaya would likely sell its Ongame poker network in order to “trade up” to a bigger platform, according to the CalvinAyre piece. Since then, the company’s stock has shot up from CAD $7.71 at the end of that trading day to CAD $10.89 as of Thursday, or 40%.

Later came the CalvinAyre article, which stated that “solid” sources had assured them that a deal between PokerStars and the gaming software provider was in the works.

Responding to the high trading volume, Amaya stated that “strategic acquisitions have been and are one component of the company’s growth strategy and, as such, Amaya regularly evaluates potential acquisition opportunities.”

It went on to explain that “from time to time, this process leads to discussions with potential acquisition targets,” but that “there can be no assurance that any such discussions will ultimately lead to a transaction.” It seems plausible that, at the very least, some level of talks took place that might have helped to spark the rumors.

When comparing the spike in Amaya’s share price to Lindsell’s “trading up” statement, along with the fact that the company hasn’t released any significant news in the past few weeks to prompt such a surge, the acquisition theory is compelling. But, there are several reasons why a deal between the two companies wouldn’t make sense.

For one, it would seem that Amaya, whose market cap hovers around $500 million, according to CalvinAyre, would have trouble coming up with enough cash to purchase a company as big as PokerStars. After all, the poker giant paid its way through Black Friday, even shelling out over $700 million to purchase Full Tilt Poker and pay back its American players in the process.

Second, a PokerStars/Amaya deal could have negative regulatory implications for the company’s dealings in the regulated US internet gambling market. “Amaya Gaming services virtually every casino platform in New Jersey,” said industry expert John Mehaffey. “It also owns the Ongame platform used by Betfair. Introducing PokerStars ownership into the equation before the company is approved could create a licensing conflict.”

Yet even if there is, in fact, no deal between PokerStars and Amaya, some think that PokerStars could still be looking to sell in order to distance itself from founder Isai Scheinberg and his son and current CEO, Mark Scheinberg. It’s no secret that the poker giant has pulled out all of the stops in its quest to reenter the US online gambling market; a deal that severs executive ties with the Scheinbergs could be a final attempt at allaying regulator’s concerns.

In New Jersey, PokerStars’ licensing review was suspended for two years due to the alleged ongoing participation of the elder Scheinberg in the company and the site has already been locked out of Nevada due to a “bad actor” clause.

For the moment, that leaves California, where the company is doing battle with gaming interests who hope to insert a similar clause into any legislation that legalizes internet gambling. PokerStars announced a major partnership in California with the Morongo Band of Mission Indians, Bicycle Casino, Commerce Casino, and Hawaiian Gardens.

“As a general policy, Amaya does not publicly comment on potential acquisitions unless and until a binding legal agreement has been signed,” Amaya concluded. “The company intends to make no further comment or release regarding current market rumors unless and until such comment is warranted.”

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