Amaya - Takeover Bid Too Low

| About: Amaya Inc. (AYA)

Amaya (NASDAQ:AYA), parent company to PokerStars and BetStars, confirms that it has received a non-binding indication from its Chairman and Chief Executive Officer, David Baazov, that he intends to make an all-cash proposal to acquire Amaya at a price currently estimated by Mr. Baazov to be C$21.00 per common share.

The Amaya share closed at C$14.99 in Friday's trading, implying a 40% bid premium. The board of directors of Amaya has established a special committee of independent directors to review any proposal that may be forthcoming, as well as other alternatives that may become available to Amaya. Amaya's Lead Independent Director, Dave Gadhia, will chair the special committee.

As of the time of the release, the special committee has neither received nor solicited a formal bid or offer related to a potential transaction and there can be no assurance that Mr. Baazov's intention will result in a formal bid or offer or that any such bid or offer will ultimately result in a completed transaction.

As we recently reported, Amaya only a few days ago provided an update to its 2015 full-year financial guidance saying its result will fall within the upper end of the previously announced guidance ranges. We had also reported that Amaya's new sports betting brand BetStars could be off to a great start. As reported by igamingbusiness.com, William Hill is benefitting from its Australian Open sponsorship right now. William Hill generated an 80% year-on-year increase in betting turnover in Australia on the opening day of the Australian Open tennis grand slam event, of which it is an official partner. The overall rise, reported by the Sydney Morning Herald newspaper, was dwarfed by a 300% leap in in-play betting, and came despite comprehensive media coverage of match-fixing allegations against the sport.

As an eager follower of the international tennis circuit, we have noticed heavy advertising by Amaya owned Betstars, the new sports betting brand by the makers of Pokerstars, in connection with the TV broadcasting of the Australian Open in Europe. Eurosport, which has the broadcasting television rights for Europe is showing Betstars commercials in basically every break during and between the matches. Given William Hill's success during the Aussie Open, it seems highly likely that Betstars sees a similar success.

Regarding the bid price of C$21 per share, or USD 14.9, we find it to be far too low. Looking at listed European online casino and betting operators such as Betsson, Unibet and Bwin we can note that they are trading at an expected 2016 P/E-ratio of more than 20x. In the case of Amaya, Clarus Securities recently set a 2016 EPS estimate of USD 2.05. Consensus is looking for a 2016 EPS of USD 1.58. Applying a P/E-ratio of 20x, i.e. in-line or even below European peers, on consensus estimates would imply a fair share price of USD 31.6. Applied on Clarus' estimates the fair share price would be USD 41. What's more: the 2016 scenario does not even include the full-effects of a successful launch of the BetStars offer.