Considering the decline in the share price of Amaya (TSX:AYA) recently, CEO David Baazov’s non-binding indication to take the company private is “a little opportunistic”, says Global Maxfin Capital analyst Manish Grigo.
This morning, Amaya announced it had received a non-binding indication from chairman and CEO David Baazov. Baazov intends to make an all-cash proposal to acquire Amaya and take it private for $21.00 a share, a premium of about 40 per cent over Friday’s closing share price. Shares of Amaya soared more than 20 per cent Monday, closing at $18.00 on the TSX.
The company noted that no formal bid has yet been made and said it had already established a special committee of independent directors to review any proposal that might be forthcoming.
Grigo, who currently has a “Buy” rating and one-year target price of $35.00 on Amaya, thinks investors shouldn’t overreact to the news.
“We think investors should adopt a wait-and-see approach for the time being, in relation to the potential buy out,” he said. “The long-term positive trends in online gaming and Amaya in particular remain intact, namely 1) Improving regulatory climate in the US, 2) Amaya’s dominant position in online poker (71% of global market), and 3) Improving FCF and reduction in debt. However, in the short term there might be some volatility related to delays in product launches and expansion into new jurisdictions.”
Grigo says Amaya’s recent approval from the New Jersey Division of Gaming Enforcement has bolstered the feeling that its regulatory issues may be in the past. He also believes there are potential catalysts in the form of geographic expansion and new iGaming revenue streams.