Yesterday, April 24th, the online poker world was struck by the biggest news since Black Friday. PokerStars has reached an agreement with the United States Department of Justice (DoJ) to purchase former rival, online poker site Full Tilt Poker (FTP) which was inoperable for almost a year.
The most shocking aspect was that the deal was absolutely unexpected and blew off French investors Group Bernard Tapie (GBT) which was in the late stage of negotiating the FTP purchase deal with the DoJ.
However, after the big news about the PokerStars deal hit the poker media, GBT officials admitted that talks with the DoJ were over and the possible agreement of buying FTP for $80 million was off the table. According to various sources PokerStars has agreed to buy Full Tilt's assets for $750 million, $330 million of which would be used to refund both American players and those from the rest of the world.
The purchase should come as a relief to all users whose money was frozen in Full Tilt Poker accounts for almost a year, as according to the reports, all players should be refunded within 90 days after the launch of the new Full Tilt Poker.
GBT lawyer Behnam Dayanim says player refunds were one of the main reasons why the deal between the group and the DoJ didn't go through; GBT was aiming for a one year refund period. He also said that there were other legal issues the group was deeply concerned about, as most of FTP's assets are located outside the United States and therefore the purchase deal could have been denied by the overseas jurisdictions.
FTP's legal mess was one of the main issues which caused negotiations between GBT and the DoJ. The two parties hit a dead end which sent US attorneys to a backup plan – PokerStars. However, Dayanim believes that by paying the American government $420 million, PokerStars is coming out clean from the Black Friday mess.
“If accurate, we can only assume that PokerStars determined that it was willing to accept these legal and financial risks in order to resolve its own legal situation with DOJ,” Dayanim said in his statement. He also admitted that GBT was aware of the fact that the DoJ was considering other options regarding the FTP sale. “Clearly, we understood that they were negotiating with another party,” Dayanim said.
On Tuesday, Dayanim published the following statement:
Groupe Bernard Tapie regrets to announce that, after seven months of intensive work, our efforts to obtain final approval of the United States Department of Justice of the agreement to acquire the assets of Full Tilt Poker have ended without success.
Ultimately, the deal failed due to two major issues.
1. The parties could not agree on a plan for repayment of ROW players. GBT proposed a plan that would have resulted in immediate reinstatement of all ROW player balances, with a right to withdraw those funds over time, based on the size of the player balance and the extent of the player’s playing activity on the re-launched site. All players would have been permitted complete withdrawal of their balances, regardless of whether they played on the site, by a date certain, and 94.9% of ROW players would have been fully repaid on day 1. DOJ ultimately insisted on full repayment with right of withdrawal within 90 days for all players– a surprise demand made in the 11th hour, after months of good-faith negotiations by GBT.
2. The legal complications surrounding the deal – specifically, questions surrounding the legality of the forfeiture under non-US laws – also proved unresolvable. All of the key assets of the FTP companies reside outside of the United States. A non-US court well might regard the purported forfeiture as a “fraudulent transaction” and declare it invalid or deem the acquirer of the assets responsible for all of those creditor obligations.
Given the $80 million purchase price, and the substantial amount of cash needed to relaunch FTP, those issues ultimately proved too substantial to overcome.
GBT is very conscious of the hopes it has created — among FTP employees that they will retain their jobs, among FTP players that they will recover their balances, and among the entire poker community that the world's finest poker platform will be relaunched and bring a needed added element of competition to a world market that today is fully dominated by a single operator.
GBT cannot accept the end of those hopes. For that reason, unless a concrete and legally viable solution is found in the very coming days to save the employees and repay the players of FTP, we will move to our own plan of action.
We understand from press reports that the DOJ may have entered into an agreement with PokerStars pursuant to which PokerStars will acquire the FTP assets. If accurate, we can only assume that PokerStars determined that it was willing to accept these legal and financial risks in order to resolve its own legal situation with DOJ.
If a PokerStars acquisition of FTP means that all FTP players will be fully repaid immediately, we are very happy for the players, as their final and full repayment has always been our priority. We only regret that such a deal would signal further consolidation of a poker market already dominated by a single player — an outcome that may raise antitrust concerns and that, in the long run, is probably not good for players and for the whole online poker industry.
Head of Corporate Communications for PokerStars, Eric Hollreiser posted the following comment on the PokerStars Blog.
We've had a lot of inquiries and there's lots of speculation on the forums, so I wanted to address the PokerStars chatter. As you know, PokerStars is in settlement discussions with the U.S. Department of Justice. As such settlement discussions are always confidential, we are unable to comment on rumors. As soon as we have information to share publicly we will do so.
Stay tuned for all the latest news reading the PokerStars-Full Tilt Poker deal.