A Look at the Rumored NumbersPublished on April 27th, 2012 5:47 pm EST
As you have almost surely heard by now, Pokerstars is rumored to be in negotiations with the US Department of Justice to both purchase Full Tilt Poker and settle with the US government simultaneously.
Pokerstars has not denied the possibility of such a deal taking place, which just adds more credibility to the rumors.
According to Alexander Dreyfus, CEO of Chili Poker, Pokerstars will be forking out $750 million to close the deal.
Many people have taken to Twitter and other social media to say that such a deal makes absolutely no sense, especially considering the fact that Groupe Bernard Tapie was set to purchase Full Tilt Poker's assets for just $80 million.
It's important to note that the rumored $750 million that Pokerstars would be shelling out would likely include the following:
-$300+ million to repay all FTP player balances
-hundreds of millions of dollars to the US government to settle the Pokerstars and FTP civil suits
-all of the Full Tilt Poker assets (software, player list, $ owed by pros, etc)
Don't forget that the US government was initially looking for $1.5 billion from Pokerstars and $1 billion from Full Tilt Poker - if Pokerstars could settle both civil suits for around $300-$400 million total, is that really a bad deal? Don't forget that Party Poker settled with the US government for $105 million back in 2009, and they had pulled out of the US shortly after the UIGEA was signed into law.
Pokerstars and the DoJ have been in negotiations for roughly a year now. According to various publications, the potential Pokerstars/Full Tilt Poker deal came together "very quickly". It's not a stretch to think that something like this went down:
1. DoJ doesn't like the proposed GBT deal.
2. DoJ offers concessions to Pokerstars if they agree to take over FTP and pay players back themselves.
Concessions might come in the form of a lower fine amount, an agreement that PS/FTP can re-enter the US market if/when online poker is legalized, etc. Just speculating..
It's tough to criticize this rumored deal between Pokerstars and Full Tilt Poker without knowing where the settlement negotiations between the DoJ and Pokerstars were at. What if the DoJ was demanding at least $500 million in fines and that Pokerstars not be allowed back into the US market in the future? What if the DoJ then agreed to significantly lower the fine amount (to something like $300-$400 million) and allow Pokerstars/FTP back into the US in the future if Pokerstars agreed to take care of the Full Tilt Poker situation? Would that still be a bad deal for Pokerstars?
Contrary to what some people may think, the DoJ actually wants all players (US and ROW) to receive their money back from Full Tilt Poker.
If the rumored deal goes down and the numbers are similar to what was mentioned above, Pokerstars will have:
-a clean bill of health from the DoJ
-a tremendous amount of goodwill from players
-an even greater chokehold on the online poker market
-a likely agreement that would allow them to re-enter the US market in the future
-two software packages that could be licensed to brick-and-mortar casinos in opening markets such as Nevada
On top of that, a settlement of Pokerstars' legal issues would allow them to possibly take their company public in the future or raise money in other ways (sell a piece of the company, etc). With a clean bill of health from the DoJ, Pokerstars could open itself up to some interesting partnership possibilities..
People point to Full Tilt Poker as a "toxic" asset and a tarnished brand (as of this second, it absolutely is). That changes overnight if Pokerstars takes over the company - I don't know about you, but I would have zero reservations about playing on FTP once again if Pokerstars takes over the company and pays everybody back. With Pokerstars backing the company, Full Tilt Poker could easily be worth hundreds of millions of dollars again. A year of smooth operations and Full Tilt Poker could quickly regain their lost lustre, giving Pokerstars a very valuable asset that they could offload down the road (especially if poker is legalized in the US) for way more than what they paid for it. Is it a stretch to think that PS could sell FTP for hundreds of millions of dollars down the road, especially if there is online poker legislation passed in the United States?
The cherry on the sundae would be the tremendous goodwill that Pokerstars would be receiving from the online poker community if they pulled off this deal. Let's say that you are a British player that has $15,000 stuck on Full Tilt Poker right now, and Pokerstars rides in and saves the day, repaying you your full balance. Are you really going to spend any serious time playing at a room that is not affiliated with Pokerstars after that? Let's say that you are a US player that has $2,000 stuck on Full Tilt Poker, and Pokerstars ends up repaying you your full balance. Where do you think that you are going to play if Pokerstars and Full Tilt Poker enter the US market after a federal online poker bill is signed into law, all other things being equal?
This is all just speculation right now - Pokerstars is still negotiating with the DoJ, and the Full Tilt Poker deal is just a rumor.
Having said that, it's pretty easy to see how the rumored $750 million price tag to purchase FTP/settle with the DoJ could end up being a fantastic deal for Pokerstars..
Filed Under: Online Poker Rooms