Amaya Investor Would Like to See more Transparency in Baazov’s Takeover Bid
SpringOwl Asset Management LLC. is an American activist investor for the Canadian gaming company, Amaya Inc. The hedge fund sponsor has been boosting its stake in the company since earlier this year from September 2016. They have made a claim that the USD 4.1 billion takeover bid that has been proposed by the online gaming company’s founder lacks credibility. They also alleged that his bid shows distracted management.
The founder and owner of the Canadian company, David Baazov, has made a bid to take his company private. However, the Chief Executie Officer of SpringOwl Asset Management LLC., Jason Ader, said Amaya should move on unless Baazov increases his cash bid and makes his sources of funding more transparent.
Ader also penned a letter to Amaya’s current CEO and chairman raising his concerns with the matter. In it he also suggested that the company should add three directors to their board to represent interest of the shareholders. He also urged the PokerStars’ owner to shake off “the undue influence” of Baazov from their decision making process.
“If I were making a USD 4 billion bid and would want the shareholders to take me seriously, I would provide much more transparency to the shareholders,” the New York- based Ader said on Monday, the 4th of December 2016, in a phone interview.
He also added that “Amaya needs to get back to growing the business. It’s competitive out there.”
There has been a rise in concern about where Baazov will get the financing for his offer. The USD 4.1 billion equity portion of his offer is comprised of USD 3.65 billion in commitments from outside sponsors. It has been noted that shares in the Montreal- based company are trading at about 20 per cent below Baazov’s CAD 24 per share bid.
A Dubai-based investor, Kalani Lal of KBC, said last month, on the 14th of November 2016 that KBC Aldini Capital Ltd. had “no involvement” whatsoever in the proposed deal. Details of an alleged deal were announced without the firm’s knowledge or consent. Lal, the Chief Executive Officer of KBC, told The Globe and Mail that he did not know what Amaya was and his company had not held any discussions with them of any nature. KBC has since filed a complaint with the U. S. Securities and Exchange Commission (SEC) for the fraudulent use of the company name.
In a subsequent filing to the U. S. Securities and Exchange Commission, however, Baazov said as a result two Hong Kong based funds would be increasing their support for the takeover bid. The two companies, named the Head and Shoulders Global Investment Fund SPC and Goldenway Capital SPC have supposedly pledged their increased support for the deal.
According to Bloomberg, Baazov has, in fact, received equity commitment letters from the funders. According to a SEC filing from Friday the 23rd of November 2016, Head and Shoulders Global Investment Fund SPC and Goldenway Capital SPC will be contributing USD 3.45 billion towards the takeover bid. The chairman of the Head and Shoulders Financial Group even told Bloomberg in a phone interview that they would continue to support Baazov in this proposal.
In this new filing, Baazov also said that KBC was not part of the financing but at the same time fails to mention Ferdyne Advisory Inc. This was the other financing company that was listed in the release dated the 14th of November 2016, which was used to announce the takeover offer of USD 4.1 billion.
Ader said that these little- known entities make the offer look more suspicious.
He said, “If we have a credible bid with transparency, then we should consider it.”
He added, “But the current price seems low and the lack of transparency and the information about the sources of funding raises a lot of questions.”
The New York-based company owned less than 1 per cent of Amaya Inc. on the 30th of September 2016. However, according to Ader, since then they have more than doubled their stake in the company. Ader is a former gaming and casino analyst from Bear Stearns Cos. and a director of the Las Vegas Sands Corp. He is currently running SpringOwn Asset Management and at the moment the company only manages its own capital.
Baazov stepped down as CEO of Amaya Inc. earlier this year, after he was charged in an insider trading probe by Quebec’s securities regulator. So far, he has denied all the allegations.
He responded to this line of communication from Ader. His spokesman, Riyaz Lalani wrote to Ader and other investors an e-mailed response.
He said, “Mr. Baazov stands behind his offer and intends to continue engaging constructively with Amaya towards a board supported transaction.”
Ader’s letter, which was addressed to the CEO of Rafael Ashkenazi and the Chairman of Divyesh Gadhia, said that Amaya should consider placing Baazov’s shares in a divestiture trust. According to regulatory filings, Baazov remains Amaya’s second- biggest shareholder. He owns a 17 per cent stake in the company.
Amaya has also received a letter from SpringOwl Asset Management LLC. They too responded via email. Company spokesman, Eric Hollreiser, wrote that they “will continue to engage constructively” with the investor.
He also mentioned, “The Board and management welcome input from all of our shareholders and look forward to continuing to actively engage with them.”
The uncertainties surrounding the offer are doing great harm to the Canadian online gaming giant. According to Ader , they are holding back a very valuable company and delaying the hiring process.
Lastly, in his letter, he also called Baazov’s bid “a continued attempt by a discredited former executive to capitalize on the Amaya situation at other shareholders’ expense.”
SpringOwl Asset Management LLC.
SpringOwl Asset Management LLC is an employee owned hedge fund sponsor. The company was founded in 1970 and is based in New York City. The firm primarily provides its services to pooled investment vehicles. They manage a series of hedge funds for their clients. The firm also manages client focused portfolios. They invest in the public equity, fixed income and hedging markets from across the world.
The firm typically invests in common stocks, convertible debentures, convertible preferred stocks, other securities or securities combinations having equity characteristics. This includes warrants for or rights to purchase equity securities and combination of debt securities and securities having equity characteristics. The company employs a fundamental analysis with long or short strategy and a bottom- up stock picking approach to make their investments. The firm also conducts in-house research before making the decision on how to make their investments.