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Acquisition Creates World's Largest Publicly-Traded Online Gaming
MONTREAL, CANADA and ONCHAN, ISLE OF MAN, June 12, 2014 /CNW/ - Amaya
Gaming Group Inc. (TSX: AYA) ("Amaya" or the "Corporation") and
privately held Oldford Group Limited ("Oldford Group"), the parent
company of Rational Group Ltd. ("Rational Group"), the world's largest
poker business and owner and operator of the PokerStars and Full Tilt
Poker brands, announced today they have entered into a definitive
agreement (the "Agreement") for the Corporation to acquire 100% of the
issued and outstanding shares of Oldford Group in an all-cash
transaction for an aggregate purchase price of $4.9 billion (the
"Purchase Price"), including certain deferred payments and subject to
certain other customary adjustments (the "Transaction"). All $ figures
are in US dollars unless noted otherwise.
KEY TRANSACTION HIGHLIGHTS
The Transaction will result in Amaya becoming the world's largest
publicly-traded online gaming company. The online poker platforms
PokerStars and Full Tilt Poker are collectively the world's most
popular and profitable online poker brands with more than 85 million
registered players on desktop and mobile devices.
For calendar year 2013, pro forma combined revenue, EBITDA and adjusted
EBITDA1 of Amaya and Oldford Group were $1.3 billion, $474.8 million and $473.8
million, respectively. For 2014, the Corporation is projecting pro
forma adjusted EBITDA, assuming the Transaction had been completed as
of January 1, 2014, of between $600 and $640 million.
The Transaction combines complementary businesses with minimal overlap:
Isle of Man-headquartered Rational Group's B2C poker business including
PokerStars, Full Tilt Poker, live poker tours and events, and online
and TV poker programming; and Montreal-headquartered Amaya's B2B
interactive and physical casino and lottery gaming solutions.
Under the terms of the Transaction, Oldford Group shareholders led by
Mark Scheinberg, founder and Chief Executive Officer, will dispose of
their shares to a wholly-owned subsidiary of Amaya. Mr. Scheinberg and
other principals of OIdford Group will resign from all positions with
Oldford Group and its subsidiaries on completion of the Transaction.
Rational Group's executive management team will be retained and online
poker services provided by PokerStars and Full Tilt Poker will be
unaffected by the Transaction, with players continuing to enjoy
uninterrupted access to their gaming experience.
The boards of directors of both Amaya and Oldford Group unanimously
approved the Agreement.
The Transaction will be financed through a combination of cash on hand,
new debt, a private placement of subscription receipts, a private
placement of common shares and a private placement of non-voting
convertible preferred shares.
Affiliates of GSO Capital Partners LP ("GSO"), the credit division of
The Blackstone Group (NYSE: BX), have agreed to participate in the debt
financing, to subscribe for $600 million in convertible preferred
shares, and to purchase $55 million of common shares of the Corporation
with each common share priced at C$20 upon closing of the Transaction.
An investment manager (the "Investment Manager"), on behalf of its
clients, has agreed to participate in the debt financing, to subscribe
for approximately $270 million in convertible preferred shares, and to
purchase approximately $55 million of subscription receipts.
No change related to this Transaction is contemplated for Amaya's Board
1 Adjusted EBITDA as used by the Corporation means earnings before
interest and financing costs (net of interest income), income taxes,
depreciation and amortization, stock-based compensation, restructuring
and other non-recurring costs, and non-controlling interests. Adjusted
EBITDA is a non-IFRS measure. Amaya believes this non-IFRS financial
measure provides useful information to both management and investors in
measuring financial performance, the ability to fund future working
capital needs, to service outstanding debt, and to fund future capital
expenditures. This measure does not have a standard meaning prescribed
by IFRS and therefore may not be comparable to similarly titled
measurers presented by other publicly traded companies, and should not
be construed as an alternative to other financial measures determined
in accordance with IFRS. Other issuers may calculate adjusted EBITDA
"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 David Baazov, CEO of Amaya.
"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."
Rational Group Founder and CEO Mark Scheinberg said: "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. 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 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. 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.
In recent years, Amaya has experienced rapid growth, partly through
strategic acquisitions that have strengthened its core offering of B2B
technology-based gaming solutions. Amaya has an expansive footprint in
regulated markets in the U.S.A., Canada and Europe through the
provision of its online, land-based and lottery solutions to licensed
commercial, tribal and charitable gaming operations as well as
government lotteries and gaming control agencies.
Rational Group's core business is PokerStars, launched in 2001. Since
then, PokerStars has become the world's largest online poker site:
hosting the most players, offering the largest prize pools and the
greatest variety of poker games to millions of players.
PokerStars set a Guinness World Record in June 2013 when 225,000 players
competed in a single online poker tournament. Together with Full Tilt
Poker, Rational Group holds a majority of the global market share in
real money online poker and is a leader in almost every regulated
market in which it operates. Rational Group holds online poker licenses
in 10 jurisdictions- more than any other gaming company - including the
major European markets of France, Italy and Spain. Rational Group is
also the world's largest producer of live poker events and poker
programming for television and online audiences.
Rational Group employs more than 1,700 people globally and is
consistently selected as one of the "Best Workplaces" in the UK,
Ireland and Costa Rica by the Great Places to Work Institute.
In calendar years 2012 and 2013, Oldford Group recorded revenues of $976
million and $1.1 billion, respectively, and adjusted EBITDA of $342
million and $420 million, respectively. Its cash flow from operations
in 2012 and 2013 was $267 million and $317 million, respectively. The
Transaction is expected to be immediately accretive to earnings and
provide strong cash flow from operations for Amaya.
TRANSACTION DETAILS AND CLOSING CONDITIONS
Under the terms of the Agreement, a wholly owned subsidiary of Amaya
will pay $4.9 billion to the holders of Oldford Group securities, which
amount will be satisfied by a $50 million deposit made on the date
hereof and a cash payment of $4.45 billion at closing of the
Transaction, as adjusted in accordance with debt and working capital
provisions set out in the Agreement, and with a deferred payment of
$400 million which shall be subject to adjustment, payable upon the
earlier of (i) July 31, 2017, and (ii) 30 months following closing of
the Transaction, based upon the occurrence of certain events. If the
Agreement is terminated prior to closing of the Transaction, under
certain circumstances Oldford Group will be entitled to retain the $50
million deposit, which amount may be increased by increments of $10
million under certain circumstances.
In connection with the Transaction, and as consideration for GSO's and
the Investment Manager's significant role in the financing of the
Transaction, the Corporation has granted 11 million common share
purchase warrants to GSO (the "GSO Warrants") and 1.75 million common
share purchase warrants to the Investment Manager (the "Investment
Manager Warrants", collectively with the GSO Warrants, the "Warrants"),
each with an exercise price of C$0.01 and exercisable for a term of 10
years, as payment for a portion of the fees payable to the two parties.
Completion of the Transaction will be subject to the approval by Amaya's
shareholders and to customary closing conditions, including receipt of
all regulatory approvals and that of the TSX regarding the Transaction
and the listing of the common shares issuable in connection with the
Transaction, including those underlying the Warrants, the subscription
receipts and the convertible preferred shares. Amaya and Oldford Group
anticipate that the Transaction will be completed on or about September
David Baazov, Amaya's founder, chairman and CEO, along with several
other Amaya shareholders, which combined own approximately 28% of
Amaya's existing common shares as of yesterday, have entered into
voting agreements in support of the resolutions relating to the
Transaction to be passed at the upcoming shareholder meeting.
PURCHASE PRICE FINANCING DETAILS
The Purchase Price will be paid using a combination of cash on hand, new
credit facilities and equity financing, allocated as follows:
$2.1 billion senior secured credit facilities, consisting of a $2.0
billion first lien term loan and a $100 million revolving credit
facility fully underwritten by Deutsche Bank AG New York Branch
("Deutsche Bank"), Barclays Bank PLC ("Barclays"), and Macquarie
Capital (USA) Inc. ("Macquarie Capital").
$800 million senior secured second lien term loan fully underwritten by
Deutsche Bank, Barclays, and Macquarie Capital, with participation from
GSO and the Investment Manager.
$1 billion to be raised through the issuance of convertible preferred
shares on a private-placement basis at an initial conversion price of
C$24 per convertible preferred share.
C$500 million to be raised through the issuance of subscription receipts
convertible on a one-to-one basis into common shares upon completion of
the Transaction on a bought-deal private-placement basis, and an
Underwriters' Option to purchase subscription receipts for additional
gross proceeds of up to C$140 million and a commitment from GSO to
purchase common shares for additional gross proceeds of up to $55
Remainder of the balance payable in cash.
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.
Subscription Receipt Offering
Amaya has entered into an agreement with a syndicate of underwriters led
by Canaccord Genuity Corp. ("Canaccord Genuity"), Cormark Securities
Inc. ("Cormark") and Desjardins Capital Markets ("Desjardins")
(collectively, the "Lead Underwriters"), and Clarus Securities pursuant
to which the Lead Underwriters and Clarus Securities have agreed to
purchase from treasury, on a bought-deal private placement basis, 25
million subscription receipts of the Corporation (the "Subscription
Receipts") at a price of C$20 per Subscription Receipt (the
"Subscription Price"), for aggregate gross proceeds to Amaya of C$500
million. Amaya has also granted the Lead Underwriters an option to
purchase up to an additional 7 million Subscription Receipts at the
Subscription Price for additional gross proceeds of up to C$140
million, exercisable at any time up to 48 hours prior to the closing
date of the Subscription Receipt offering (the "Underwriters' Option").
The Subscription Receipts will be automatically converted, without
additional payment, into common shares of the Corporation on a
one-to-one basis upon completion of the Transaction. If the Transaction
is not completed within six months from the closing date of the
Subscription Receipt offering, then the Subscription Receipts shall be
automatically terminated and cancelled and the principal amount
subscribed plus accrued interest will be returned to the holders of the
Subscription Receipts in accordance with the terms of the subscription
The Subscription Receipt offering is expected to close on or about July
7, 2014. Completion of the Subscription Receipt offering is subject to
certain conditions, including receipt of the approval of the TSX and
all other necessary regulatory approvals.
Net proceeds from the Subscription Receipt offering will be used by the
Corporation to partially fund the Purchase Price payable in connection
with the Transaction.
25 million common shares of the Corporation will be issued upon
conversion of the Subscription Receipts to be sold under the
Subscription Receipt offering, representing 21% of the Corporation's
concurrently issued and outstanding common shares on a non-diluted
basis. If the Underwriters' Option is exercised, 7 million common
shares of the Corporation will be issued upon conversion of these
Subscription Receipts representing 6% of the Corporation's concurrently
issued and outstanding common shares on a non-diluted basis.
The Subscription Price represents a premium of approximately 66.4% to
the closing price of C$12.02 per common share on the TSX on June 11,
2014 and a premium of approximately 108.5% over the 30-trading day
volume-weighted average price of C$9.59 per common share on the TSX, up
to and including June 11, 2014.
Convertible Preferred Share Offering
Amaya has entered into an agreement with Canaccord Genuity pursuant to
which Canaccord Genuity has agreed to purchase from treasury, on an
underwritten bought-deal private placement basis, $130 million of
convertible preferred shares of the Corporation (the "Convertible
The Corporation has also entered into Commitment Letters, pursuant to
which (a) GSO has agreed to purchase $600 million of Convertible
Preferred Shares, and (b) the Investment Manager has agreed to purchase
approximately $271 million of Convertible Preferred Shares.
The Convertible Preferred Shares will not be listed on any exchange but,
subject to legal limitations, will be freely transferable at the option
of a holder.
Each Convertible Preferred Share has an initial principal amount of
C$1,000 and is convertible, at the holder's option, initially into
approximately 41.67 common shares of the Corporation based on the
conversion price of C$24 per common share, in each case, subject to
adjustments including 6% accretion to the conversion ratio, compounded
The Corporation may, at any time after the first three (3) years of
issuance, give notice of its election to cause all of the outstanding
Convertible Preferred Shares to be automatically converted, subject to
The Corporation expects the delivery of the Convertible Preferred Shares
to occur concurrently with the closing of the Transaction.
The Corporation expects to receive aggregate net proceeds from this
offering of approximately $944.25 million, after deducting applicable
underwriting and other fees. The Corporation intends to use the net
proceeds to partially fund the Purchase Price payable in connection
with the Transaction.
It is currently anticipated that the completion of the Convertible
Preferred Share offering, the Subscription Receipt offering, the common
share purchase commitment and the issuance of Warrants may result in
GSO beneficially owning, or having control or direction over, more than
20% of the common shares on a fully-diluted basis.
In light of the need for certain matters to be approved by shareholders
in connection with the Transaction, the Corporation has postponed its
annual and special meeting of shareholders previously announced as June
17, 2014. The annual and special meeting of the Corporation's
shareholders (the "Shareholder Meeting") will now be held on July 30,
2014 with a record date of June 11, 2014. The Corporation has received
approval from the TSX in connection with the postponement of the annual
meeting of shareholders and will file an amended notice of record date
and meeting date on SEDAR at www.sedar.com.
At the Shareholder Meeting, shareholders of Amaya will be asked to
consider, and if deemed advisable, pass a resolution to approve the
creation of the new class of Convertible Preferred Shares. The creation
of the Convertible Preferred Shares will require the approval of
two-thirds of the votes cast by shareholders present in person or
represented by proxy at the Shareholder Meeting.
The TSX requires that the issuance of the Warrants and certain terms of
the Convertible Preferred Shares also be approved by a majority of the
votes cast by shareholders present in person or represented by proxy at
the Shareholder Meeting.
The board of directors of the Corporation (the "Board") has, following
consultation with its financial and legal advisors, determined that the
Transaction is in the best interests of the Corporation, and
unanimously recommends that shareholders vote in favour of the
resolutions to be passed at the Shareholder Meeting in connection with
Deutsche Bank Securities Inc., in its capacity as one of Amaya's
financial advisors, has provided an opinion to the Board that, subject
to the assumptions, limitations, qualifications and conditions set
forth therein, the $4.9 billion cash consideration to be paid by Amaya
for the acquisition of Oldford Group is fair, from a financial point of
view, to Amaya. Canaccord Genuity has also provided an opinion to the
Board that, subject to the assumptions, limitations, qualifications and
conditions set forth therein, the $4.9 billion cash consideration to be
paid by Amaya for the acquisition of Oldford Group is fair, from a
financial point of view, to Amaya. Copies of the fairness opinions will
be included in the management information circular to be mailed to
shareholders in anticipation of the Shareholder Meeting.
The Corporation intends to mail a proxy circular in the upcoming weeks
to its shareholders in anticipation of the Shareholder Meeting. Details
of the Transaction and the matters to be approved by shareholders,
including the terms of the Transaction as set out in the Agreement and
the rationale for the Board's decision to enter into the Transaction,
will be set out in the proxy circular which will be available on SEDAR
under the Corporation's profile at www.sedar.com once mailed. Shareholders registered on the books of Amaya at the close
of business on June 11, 2014 will be entitled to receive notice of, and
vote at, the Shareholder Meeting.
Deutsche Bank Securities Inc. and Canaccord Genuity are acting as lead
financial advisors to Amaya in connection with the Transaction.
Macquarie Capital and Barclays acted as co-advisors. Houlihan Lokey
acted as financial advisor to Oldford Group. Amaya was represented by
Osler, Hoskin & Harcourt LLP, and by Greenberg Traurig, LLP acting as
U.K., The Netherlands and U.S. counsel, with Fox Rothschild, LLP being
retained as special gaming counsel by the Corporation. McCarthy
Tétrault LLP acted as legal advisor to the underwriters with respect to
the Subscription Receipt offering and Canadian legal advisor to GSO,
with White & Case LLP acting as U.S. and U.K. legal advisor to GSO. The
syndicate of lenders under the term loan facilities was represented by
Cahill Gordon & Reindel LLP. The securityholders of Oldford Group were
represented by Herzog Fox & Neeman and Stikeman Elliott LLP acted as
legal advisor to Canaccord Genuity with respect to the Convertible
Preferred Share offering.
CONFERENCE CALL AND WEBCAST PRESENTATION
Amaya will host a conference call and webcast presentation accompanied
by slides on June 13, 2014 at 8:30 a.m. ET. To access via
tele-conference, please dial +1.888.231.8191 or 1.647.427-7450. The
playback will be made available two hours after the event at
+1.855.859.2056 or +1.416.849.0833. The Conference ID number is
60250512. Media representatives are welcome to participate on the call
on a listen-only basis. To access the webcast please use this link: www.newswire.ca/en/webcast/detail/1371129/1519499.
Amaya provides a full suite of gaming products and services including
casino, poker, sportsbook, platform, lotteries and electronic gaming
machines and game systems. Some of the world's largest licensed gaming
operators, casinos and lotteries are powered by Amaya's interactive,
land-based, and lottery solutions, including in multiple U.S. states
and Canadian provinces, more than 80 Native American tribal
jurisdictions, and multiple European jurisdictions. The company
supplies online casino games to multiple Atlantic City casinos
permitted to provide real money online gaming in New Jersey, the most
recent and thus far largest U.S. state to regulate iGaming. For more
information, visit www.amayagaming.com.
About The Rational Group
The Rational Group operates gaming and related businesses and brands
including PokerStars, Full Tilt Poker, the European Poker Tour,
PokerStars Caribbean Adventure, Latin American Poker Tour and the Asia
Pacific Poker Tour. These brands collectively form the largest poker
business in the world, comprising online poker games and tournaments,
live poker competitions and poker programming created for television
and online audiences. In addition to operating two of the largest
online poker sites where it has dealt more than 100 billion poker hands
and held over 800 million online tournaments, the group is the largest
producer of live poker events around the world.
Rational Group's businesses are among the most respected in the industry
for delivering high-quality player experiences, unrivalled customer
service, and innovative software. The Group employs industry-leading
practices in payment security, game integrity, and player fund
protection, offering customer support in 29 languages. The Rational
Group holds more online poker licenses than any other e-gaming company,
and works closely with regulators around the world to help establish
sensible global regulation.
This News Release for Amaya contains forward-looking statements about
the proposed acquisition by Amaya of all of the equity securities of
Oldford Group. Forward-looking statements are typically identified by
words such as "expect", "anticipate", "believe", "foresee", "project",
"could", "estimate", "goal", "intend", "plan", "seek", "strive",
"will", "may" and "should" and similar expressions. Forward-looking
statements reflect current estimates, beliefs and assumptions, which
are based on Amaya's perception of historical trends, current
conditions and expected future developments, as well as other factors
management believes are appropriate in the circumstances. Amaya's
estimates, beliefs and assumptions are inherently subject to
significant business, economic, competitive and other uncertainties and
contingencies regarding future events and as such, are subject to
change. Amaya can give no assurance that such estimates, beliefs and
assumptions will prove to be correct.
This News Release contains forward-looking statements concerning: the
combined company's financial position, cash flow and growth prospects;
certain strategic benefits, and operational synergies; management of
the combined company; the timing of Amaya's shareholders meeting and
publication of related shareholder materials; the expected completion
date of the proposed transaction; and Amaya's and Oldford Group's
anticipated future results. The pro forma information set forth in this
News Release should not be considered to be what the actual financial
position or other results of operations would have necessarily been had
Amaya and Oldford Group operated as a single combined company as, at,
or for the periods stated.
Numerous risks and uncertainties could cause the combined company's
actual results to differ materially from the estimates, beliefs and
assumptions expressed or implied in the forward-looking statements,
including, but not limited to: failure to realize anticipated results,
including revenue growth from the combined company's major initiatives;
heightened competition, whether from current competitors or new
entrants to the marketplace, changes in economic conditions including
the rate of inflation or deflation, changes in interest and currency
exchange rates and derivative and commodity prices; failure to achieve
desired results in labour negotiations; failure to attract and retain
key employees or effectively manage succession planning; damage to the
reputation of brands promoted by the combined company; new, or changes
to current, gaming laws in various jurisdictions; changes in the
combined company's regulatory liabilities including changes in tax
laws, regulations or future assessments; new, or changes to existing,
accounting pronouncements; the risk of violations of law, breaches of
the combined company's policies or unethical behaviour; the risk of
material adverse effects arising as a result of litigation; and events
or series of events may cause business interruptions.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Other risks and uncertainties not presently known to Amaya
or that Amaya presently believes are not material could also cause
actual results or events to differ materially from those expressed in
its forward-looking statements. Additional information on these and
other factors that could affect the operations or financial results of
Amaya or the combined company are included in reports filed by Amaya
with applicable securities regulatory authorities and may be accessed
through the SEDAR website (www.sedar.com).
There can be no assurance that the proposed Transaction will occur or
that the anticipated strategic benefits and operational synergies will
be realized. The proposed Transaction is subject to various regulatory
approvals, including approvals by the TSX, and the fulfilment of
certain conditions, and there can be no assurance that any such
approvals will be obtained and/or any such conditions will be met. The
proposed combination could be modified, restructured or terminated.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect Amaya's expectations only as
of the date of this News Release. Amaya disclaims any obligation to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.
This News Release is not an offer to sell or the solicitation of an
offer to buy any securities in the United States or in any jurisdiction
in which such offer, solicitation or sale would be unlawful. The
securities described in this News Release have not been and will not be
registered under the United States Securities Act of 1933, as amended,
or any state securities laws and may not be offered or sold within the
United States absent registration or an applicable exemption from the
registration requirements of such laws.