Alex Cutulenco | Ubika Research Analyst | February 4, 2016: Amaya’s (TSX: AYA)(Nasdaq: AYA) CEO David Baazov announced Monday that he’s working on a plan to buy the Company he founded for approximately C$21 per share. And while Monday’s closing price of $18 indicates some market skepticism that the deal will get done, Mr. Baazov’s track record suggests this might be a gamble worth taking.
Amaya’s stock price closed at just $18 a share Monday following the announcement. What’s up?
Well, one of the Company’s ‘Top 10 investors’ isn’t very hopeful about the agreement, stating “the odds of a deal are good, though it won’t be at this price” as reported on BNN. And the fact that “the particular form and structure of the transaction has not been determined, and no discussions have commenced between Mr. Baazov and Amaya with respect to any particular transaction” isn’t exactly reassuring investors either. However, Mr. Baazov has done this before, and investors should remember that.
Figure 1: Top 10 Amaya Shareholders
Source: Thomson Reuters (02/02/2016)
Mr. Baazov currently owns 24.6 million common shares of Amaya, representing about 18.6% of the outstanding common stock. Back in 2014, he wanted to stage the $4.9 billion purchase of PokerStars, the world’s biggest online poker company. He walked into Blackstone Group seeking the necessary financing, and despite Amaya’s stock trading just under $7, he wanted Blackstone and other investors to buy shares at nearly $18/share. He was abruptly thrown out on the street. Several months later, and a couple meeting between Amaya and PokerStars, Mr. Baazov raised $1.7 billion of Amaya stock for about $18/share, and purchased the Company he desired.
His ability to make a deal like that happen (Amaya having $150 million in revenues and buying a company with $1.1 billion in revenues) says something. Now history is not always a good representation of the future, but this case is very similar.
Cantor Fitzgerald analyst Ralph Garcea has a target price of C$45 on the stock, stating that the core business (being PokerStars) is healthy and growing 10% (Casino) and 10-15% (Sportsbook) for the long term. The added strength in the USD is also showing positive on the Company’s books. The average analyst price target on Amaya is at $35/share, a far cry from the $21 proposed offer.
Whatever Baazov is planning, it will be hard to gain shareholder approval for such a transaction. Still surprising to see shares trading at such a discount from Baazov’s offer and average analyst estimates. Clearly there is a discrepancy in opinions between the various parties involved.
Alex can be reach at: alex@gravitasfinancial.com
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