Mark Scheinberg Will Resign All PokerStars Duties on Completion of the Deal
Amaya Gaming Group has agreed to a $4.9 billion purchase of the Rational Group, the parent company for PokerStars and Full Tilt Poker. If the agreement stands, Amaya Gaming Group would become the world’s largest online gambling corporation.
About Amaya Gaming Group
Amaya Game is based out of Montreal, Canada. Amaya Gaming Group has a full range of gaming products and services for online casinos, sportsbooks, and poker rooms. Some of the largest Internet gambling sites are powered by Amaya Gaming Group’s software. The company has offices in the United States, Canada, Mexico, the Dominican Republic, the United Kingdom, Sweden, Malta, Gibraltar, Moldova, Armenia, Bangalore, and Singapore.
Earlier this year, Amaya acquired Cryptologic, the Irish gaming software company. The business group also purchased the online poker company, Ongame, and the slot machine manufacturer, Cadillac Jack. None of the previous takeovers comes close to being the game-changer the Rational Group purchase is.
Details of the Purchase
Full details of the purchase have yet to be revealed, but Amaya Gaming says the buyout involves cash on hand, new credit facilities, and equity financing. GSO Capital Partners, the credit division of Blackstone Group LP, will back the deal by buying $600 million in convertible preferred shares and securities. Several financial institutions, including Barclays, Deutsche Bank, and Macquarie Capital will provide $2.9 billion in financing and credit facilities.
Rational Group Background
Rational Group is based out of the Isle of Man. The group operates several online gaming businesses. The most famous of these are PokerStas and Full Tilt Poker, two of the most successful poker rooms on the Internet. Between the two of them, they have over 85 million registered card players on mobile devices and desktop computers.
Despite being the most profitable online gaming companies, both have faced trouble in recent years. In 2011, the Black Friday scandal hit. Federal prosecutors in New York launched a crackdown on the illegal online gaming operations in the USA. PokerStars and Full Tilt Poker had their U.S. domains seized and their assets frozen. Each company had members of its board of directors indicted by U.S. authorities.
PokerStars paid the U.S. government $731 million in 2012 to see their federal money laundering charges go away. Despite that deal, the repercussions of the Black Friday events continue to this day, because PokerStars is barred from many aspects of the American gaming market.
Licensed Online Poker
When U.S. states like Nevada and New Jersey legalized online casinos and poker sites, one would assume the world’s top online poker entity, PokerStars, would be a dominant force.
Instead, Nevada gaming regulators barred PokerStars from getting into their market, through “bad actor” provisions of the law. When PokerStars partnered with Resorts Casino in Atlantic City to enter the New Jersey gaming market legally. The New Jersey Division of Gaming suspended the PokerStars/Resorts Casino license application for two years, saying Rational Group needs to resolve its ongoing case with the U.S. federal government–or else those executives still indicted need to no longer be with the company. The Amaya Gaming Group deal seems to rid PokerStars of its offending executives, which might clear the way for the Resorts Casino license to be approved.
California Bad Actor Laws
Now that two separate gaming bills are in the California legislature, a bad actor law is being considered which seems specifically created to bar PokerStars from the California online gaming industry. While PokerStars came to an agreement with one Native American tribe (and three L.A. poker rooms), most the tribal casino owners of California support the bad actor clauses in the bills. The reason is obvious: PokerStars is a dangerous competitor to have, so it’s best not to have them as a competitor.
In discussing its purchase, an Amaya Gaming Group spokesman said they expect the purchase to “expedite the entry of PokerStars and Full Tilt Poker into regulated markets in which Amaya already holds a footprint, particularly the USA.”
Post-Deal Implications
The deal should be final by September 30, 2014. Meanwhile, Amaya announced profits would be accretive immediately. The management team for Rational Group is expected to remain in place.
One key person will not maintain an association. Mark Scheinburg, the founder and CEO of Oldford Group (itself owner of Rational Group), will resign from all duties with Oldford Group upon completion of the deal. This is the key move which should expedite PokerStars accession into the American online gambling marketplace once more.
