PokerStars wins again26th April 2012 7:25 am GMT
The Stars and Tilt saga has taken another amazing twist but perhaps we should not be surprised by Stars’ startling move for its former rival
For months PokerStars had refused to entertain any suggestions that it had done anything wrong in the US. This was not the most productive stance to take in settlement discussions with the US Department of Justice. There was little in the way of negotiation. Stars refused to budge.
At some stage, however, somebody on the Stars team realised the government was being remarkably flexible in agreeing to Groupe Bernard Tapie’s plan to acquire Full Tilt. Somebody somewhere must have thought: “Surely, if Full Tilt can get off these charges without having to pay anything, then we can too?”
After almost a year with little in the way of progress, someone must have said: “Hey guys, why don’t we buy Full Tilt?”
The immediate response was probably: “Huh?”
“OK, it will cost us a bit, but we have the money, right? And if we buy Tilt, we’re not just giving cash to the government, we are getting something for our money. And, of course, we get the triple bonus of stopping a competitor re-entering the market, seeing what we can make out of their technology and hiring their best remaining people. Whadyerreckon?”
“Hmmmm…when you put it like that.”
The genius behind the plan is likely to be drawn from the brains trust that has been conducting these negotiations. That will probably comprise Isai and Mark Scheinberg, general counsel Paul Telford and senior partners such as David Zornow and John Carroll at its law firm Skadden Arps Slate Meagher & Flom.
Given the severity of the DoJ charges against Stars, it was still a long journey from that germ of an idea to the stage we are at now. Despite the intransigence of its negotiating stance (which may have been exaggerated by certain sources), the DoJ must be willing to trust Stars to help clean up this mess. Which, given the circumstances, is some turnaround.
“Put it this way; they wouldn’t hand over to a bunch of crooks,” a waggish insider told me.
The DoJ must have been impressed with how quickly it repaid its own players. Since then it will have learned a lot more about the company and its professionalism. For its part, Stars has been on its own journey since the indictments and has been making every effort to become a grown-up and responsible corporate entity. Perhaps we should have guessed that Isai and friends would conjure a cunning and brilliant plan. They are the undisputed market leaders for a reason.
Meanwhile, Laurent Tapie and his father look like they have wasted the best part of six months on a failed acquisition. Sources in the French private equity market have told me Bernard Tapie has developed a bit of a reputation for failing to pull the trigger on a deal. Sources close to this deal have complained about how tight he is. One probably goes with the other and both probably stem from the fact that Tapie does not have quite as much money, or access to quite as much money as he would like to have.
In this instance, that translated into a very complex deal with the DoJ regarding the forfeiture of Full Tilt and the repayment of its former players. It had a certain genius in its construction. It was a structure that allowed Tapie to buy the company but the complexity of the structure meant it was always likely to fall over if it was pushed. It left him open to being gazumped. Ultimately, it seems, he didn’t have quite enough money to pull it off.
He should not be condemned for that. Certain poker blogs seem to be suggesting that the structure of the repayment plan was somehow dodgy because of the long term nature of some of the repayments. I would say it was ingenious. It was enough for the DoJ but it also showed PokerStars a way out. And Tapie has paid a price for his innovation.
After a year of twists and turns, I’m sure there will be more to come. Just two weeks ago I was quite wrong in cautiously predicting its conclusion. But I wasn’t the only one. Tapie and all his advisors were confident too.
This deal just gets more and more bizarre. Predicting its course is obviously a fool’s errand but forgive me one fantasy – what are the odds of Calvin Ayre stepping in and gazumping Stars?!