Updated 

Canadian company acquires PokerStars parent; New Jersey, California seen as opportunities


The parent company of online gaming giant PokerStars was purchased Friday by a Canadian Internet gambling company for $4.9 billion, but there are still numerous hurdles to clear before Nevada gamblers could see the popular wagering site on their computer screens.

Several analysts said Nevada’s year-old online poker business — which averages less that $1 million a month in gaming revenue — wasn’t the primary factor behind the deal between Amaya Gaming Group Inc. of Montreal and the privately held Oldford Group Ltd.

New Jersey, where Internet gaming has not produced the revenue figures projected by state leaders and analysts, and California, which is on center stage for online poker legalization in the U.S., provide Amaya with the greatest opportunity, analysts said.

“That’s really where the focus is behind this deal,” Eilers Research gaming analyst Adam Krejcik said Friday.

In a statement, Amaya said the transaction would make the company the world’s largest public online operator of casino games. Amaya said the companies would have combined for $1.3 billion in revenue in 2013.

Amaya, which is publicly traded on the Toronto Stock Exchange, provides gaming equipment, gaming systems, lottery systems, and interactive gaming technology to states and Canadian provinces, more than 80 American Indian tribes, and multiple European jurisdictions.

Oldford is the parent company of the Isle of Man-based Rational Group Ltd., which owns and operates the PokerStars and Full Tilt Poker brands.

PokerStars controls 54 percent of the global online gaming traffic outside the U.S. Combined, PokerStars and Full Tilt have more than 85 million registered players on desktop and mobile devices.

But the websites have been barred from entering the three legal Internet gaming states.

PokerStars accepted wagers from Americans after the 2006 Unlawful Internet Gambling Enforcement Act, which made financial transactions for online gaming illegal. In Nevada, interactive regulations include a five-year ban on companies that violated the act. The language was dubbed as a “bad actor clause.”

PokerStars pulled out of the United States in April 2011 following the indictment of its founder, Isai Scheinberg, and two other company officials in connection with fraud and money-laundering charges.

Sixteen months later, PokerStars settled its civil case by forfeiting $731 million. The agreement required Scheinberg to cease any managerial role at PokerStars. The Justice Department absolved the company of wrongdoing in accepting Internet wagers from American gamblers for the five years after the act became law.

Federal authorities didn’t prohibit PokerStars from entering legal U.S. gaming markets but state gaming regulators took an opposite view.

New Jersey gaming regulators considered a “bad actor clause” but dropped the idea. Regulators expressed their disapproval toward PokerStars when the company tried to buy the Atlantic Club last year. That deal fell apart. PokerStars later agreed to be the online gaming partner with Resorts Atlantic City, but the arrangement went nowhere.

New Jersey’s Gaming Enforcement Division suspended the Rational Group’s casino service industry license application for two years.

Neither Amaya nor Rational Group are licensed in Nevada.

In a statement, Amaya said the deal would “expedite” the entry of PokerStars and Full Tilt Poker into regulated markets in which the company already has a footprint.

In an interview with Bloomberg News, Amaya Chairman and CEO David Baazov said he was confident U.S. regulators will consider PokerStars differently under new ownership.

“Amaya is licensed in many jurisdictions, over 80 worldwide,” he said. “This will be worked out on a state-by-state basis.”

Changing Nevada’s “bad actor clause” would have to be accomplished in the state Legislature, gaming attorneys said.

Also, PokerStars would have to team up with a Nevada casino operator to enter the market. Most of the major casino operators already have deals with online gaming firms, other than Las Vegas Sands Corp., which is adamantly opposed to online gaming legalization, and Wynn Resorts Ltd.

Meanwhile, Krejcik said Amaya would initially focus on New Jersey, where online gaming revenue declined for the second straight month in May.

There are indications that the change in ownership could mean a favorable nod for PokerStars in New Jersey.

California is little more problematic.

PokerStars has deal in place to operate online poker for three Southern California card rooms and the Morongo Band of Mission Indians. However, 13 other Indian tribes are backing legislation that would legalize online poker, but would include the “bad actor clause.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

 

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