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So what is David Baazov playing at?

4th February 2016 10:49 am GMT
David Baazov was the name that dominated conversation at the ICE Totally Gaming show in London. Lots of people have a theory about what he is planning by taking Amaya private and the rumour mill has gone into overdrive.So let’s scotch a few of the more outlandish rumours to begin with. Isai Scheinberg is pretty unlikely to be Baazov’s “mystery backer”. Given the lack of comment from Amaya and the company’s remarkable history, one is loathed to describe it as an impossibility but Baazov is far more likely to be suing Scheinberg over the company’s history in Kentucky than he is joining forces with him. Amaya is appealing Kentucky’s $870m fine for operating in the state between 2006 and 2011. But in the absence of an agreeable settlement – and Kentucky is not prone to agreeable settlements – Baazov will go after the Scheinbergs for the money. Of course, they will likely tell him to go take a flying jump, which will push this into the courts. Secondly, PokerStars is not likely to embark on some sort of rogue strategy of targeting unregulated markets away from the public gaze. Too much has been invested in the company’s US presence to put that at risk. However, the company has been on a rollercoaster ride since…. well, since forever but particularly during the past 18 months post-acquisition. The New Jersey licensing saga has been traumatic. The insider trading investigation by Quebec’s Autorité des marches financiers (AMF) was a potentially dangerous distraction. And now, Baazov has Kentucky to deal with. These issues (and others) need to be solved and it would be a lot easier to solve them without the scrutiny of public markets. The company is also in the midst of a massive change of strategy as it evolves into a multi-product gambling company.Taking Amaya private right now also makes smart financial sense. Baazov is nothing if not an expert deal doer. He undoubtedly feels that the markets are undervaluing his company. The share price has dropped a remarkable 60+ per cent from CAD$39 at the end of November 2014 to around CAD$14 recently. That’s a fairly dramatic fall for a market leader that is basically doing okay. While some have painted this as a short-termist move to boost the share price – and it worked – there is too much at stake for that to be his sole motivation. If the markets are undervaluing the company (and don’t forget this is a company that Baazov himself already owns nearly 20 per cent of ), then he can potentially make some money on an eventual secondary sale or offering – partial or not. Given the massive consolidation in the industry, it is unlikely that any industry players will be in a position to make a rival bid right now. Maybe in a year from now, they might. So Baazov can make his move without interference… perhaps. That situation will play out – or not – over the next month or so. Baazov will move quickly as usual. It is likely he has the backing of similar investors (GSO etc) to the ones which helped him purchase Rational Group from the Scheinbergs. That accounts for a whole heap of those willing to take a punt on the gambling industry. Baazov’s antics immediately removed OpenBet from the headlines. Speculation places Playtech as the favourite to purchase the company but the GI Blog is not so sure. Vitruvian is hoping for a lot of money for the company at a time when a number of its contracts are coming up for renewal. This does not mean OpenBet is not worth something to Playtech. It is very hard to convince companies such as Gala Coral, Paddy Power or William Hill to switch platforms, and the bids from Paddy Power and William Hill are positive proof of this reality. Apparently, Vitruvian hoped to close the deal in February. This looks a lot more complex than that. In fact, it looks a lot more complex than Baazov’s take-private proposal. Expect the latter to close first.sah@gamingintelligence.com
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