Online gaming major Amaya Inc. has rejected the criticisms levelled by a major William Hill shareholder regarding the merger deal being considered between Amaya and William Hill. Amaya operates the world’s largest poker site PokerStars which accounts for over 70 percent of the online poker industry.
The shareholder Parvus Asset Management sent an open letter to the board of William Hill stating that a deal between the two would destroy shareholder value and asked the board to consider other options.
Mads Eg Gensmann, co-founder of the 4.3-billion euro Parvus had earlier said in a media interview that the deal didn’t pass even a smell test, indicating that the merger did not make sense. Responding to Parvus’ claims, Amaya said that the letter was inaccurate.
In a statement, Eric Hollreiser spokesperson Amaya said,
The Parvus letter contains inaccuracies that can be dispelled through reading Amaya’s public filings, which will attest to the high-quality, consistent profitability and stable growth prospects of our business.
The two gaming companies are in talks for a merger of equals which was first reported on Oct. 7. William Hill has said that it is still assessing the deal. Gensmann stated that he has no preferred option but wanted the board to consider all options carefully. He added that pursuing Amaya was an error of judgement.
Parvus’s criticisms regarding the deal are founded on the fact that Amaya’s online poker business would harm William Hill’s prospects in the long run. The company’s letter also pointed out that the deal’s financial structure favored Amaya’s shareholders over William Hill’s.
Parvus is said to be the largest shareholder of William Hill having a 370-million-pound (US$460.1 million) interest in the company by way of derivative instruments that covers 14.3 percent of its outstanding shares. Parvus has said that it will be converting these instruments into shares if an Amaya deal reaches the voting stage.
Gensmann observed that under the deal William Hill was effectively buying an overvalued asset using an underpriced currency, referring to the plunging value of the pound sterling. He stated that it was double standards for William Hill to consider the Amaya deal while rejecting an earlier offer made by a consortium comprising Rank Group and 888 Holdings citing cross-border transaction complexity.
According to a spokesperson of William Hill, the Board would not proceed with a deal if it did not benefit the shareholders. The spokesperson added that given the strategic fit, potential for synergies and diversification, the Board had a duty to examine the Amaya merger proposition thoroughly.