Amaya Inc. (TSX:AYA)(NASDAQ:AYA), the owner of PokerStars and Full Tilt Poker, two online poker platforms that collectively command approximately 70% of the market, announced last week it had begun merger talks with U.K.-based rival William Hill.
Amaya shares rallied sharply on the news, rising more than 12% in afternoon trading on October 7, when merger talks were officially made public.
But shares have slumped in the week since, including falling another 2.5% in early Friday trading. It’s obvious investors are starting to doubt whether such a deal will ever happen.
A number of things could potentially scuttle such a deal. Amaya is still under investigation from Quebec’s securities regulator over a massive insider trading scandal, which lead to charges being pressed against former CEO David Baazov. Baazov is still Amaya’s largest shareholder; William Hill might decide the controversy is too much.
One of William Hill’s largest shareholders also has doubts. Parvus Asset Management told William Hill’s board that a marriage with Amaya would "destroy shareholder value." Parvus’s co-founder Mads Eg. Gensmann told Reuters "it shouldn’t take more than five minutes of the board’s time to realize this deal doesn’t pass the smell test."
Parvus owns 14.3% of William Hill shares.
Canadian analysts are more neutral on a potential tie-up, saying that while there would certainly be advantages to a merger, Amaya should keep all options open, including a potential sale to a higher bidder.
