Over the last few years, gaming company Amaya has turned to an acquisition-heavy business model. The Canadian-based company snatched up a series of smaller land-based and online slot machine makers before taking a huge gamble on the purchase of PokerStars owner, Rational Group, in 2014. According to recent reports, Amaya Gaming is now steering in the opposite direction with the probable sale of Cadillac Jack Inc.
Reuters reported back in October of 2014 that Amaya was considering dumping some of its land-based slot machine makers, including the Cadillac Jack subsidiary. Now, according to Neil Linsdell, Director of Research and Equity Research Analyst for Industrial Alliance Securities, the sale of Cadillac Jack could be quickly approaching.
Amaya Gaming originally purchased the land-based slot machine maker back in 2012, finalizing the $177 million purchase in November of that year. Established in Duluth, Georgia in 1995, Cadillac Jack had grown to become a leading manufacturer of gaming devices and related technologies with products installed in more than 200 venues across the US and Mexico.
The company’s growth chart has been impressive since falling under the wing of Amaya Gaming, which, since acquiring PokerStars et al, now carries the supreme label of being the world’s largest publicly traded gaming company. So the obvious question would be; why is Amaya looking to sell its prodigious slot machine subsidiary?
Around the time of the colossal $4.9 billion Rational Group buy-out, the Canadian group stated that they were going to be gearing more towards interactive, online gaming technologies. Thus the probable sale of a land-based slot machine manufacturer shouldn’t be all that surprising.
It’s also noteworthy that Amaya could stand to make a sizeable profit from the deal. After paying approximately $177 million to acquire Cadillac Jack, Inc. back in 2012, it’s now being estimated that the gaming giant could bring in as much as $500 million on the current market; a potential turnaround of 282.5%.
One must also consider the amount of debt Amaya Gaming has accumulated in the last year due to the company’s acquisitional behavior. When CEO David Baazov spearheaded the move, he took on billions worth of high-interest debt in the process. While things are definitely looking skyward for Amaya, paying down as much of that debt as possible in the short-term would have a strong impact on the company’s growth in years to come.
Back in October of 2014, when Amaya first began exploring the possibilities of dumping its Georgia-based slot machine maker, the company said the number one goal was to advance the growth of Cadillac Jack, while at the same time providing maximum value for shareholders in Amaya Gaming.
Interestingly enough, a similar business transaction was made just two months ago when Amaya let go of its B2B online poker network, Ongame. Much like Cadillac Jack, Amaya procured the Ongame poker network in October of 2012 from bwin.party for €25 million (USD $32.2mm), then turned around and sold it in November of 2014 to Swedish company NYX Gaming for a price of 8x Ongame’s gross earnings in 2015. Although the exact value is as yet uncertain, it should amount to a tidy profit for Amaya by end of year.