If a CEO in the history of capitalism had ever managed to sell equity for such a sky-high premium, the top minds at Blackstone’s credit group had never heard of it. They abruptly ended the meeting and threw Baazov out on the street. “We left the building, and my guys were having heart palpitations,” says Baazov. “The whole time I am still negotiating with the sellers and saying, ‘Hey, I am money good.’ ”
With that one transaction Baazov is now the new king of online gambling, a near-billionaire player in a complex and high-stakes game, facing off against titans like Sheldon Adelson. The boldness of what Baazov has pulled off is stunning. Nobody–not even his own executives–thought Baazov could get Amaya, a publicly traded company with $150 million in revenues, to buy Rational Group, an Isle of Man powerhouse with $1.1 billion in revenues and a controversial history, in an all-cash deal that included Rational’s PokerStars and Full Tilt Poker.
But Baazov somehow pulled it off, and his stock recently changed hands for $33, returning more than 2,600% since he took Amaya public in 2010. Baazov’s 12.5% stake in the company is now worth $800 million. “It is an audacious deal that shocked the industry and shocked the people who watch the company,” says Robert Young, a financial analyst at Canaccord Genuity. “They went out and bought one of the crown jewels of online gaming for $4.9 billion, and their valuation was much less than $1 billion.”
Whether or not he ultimately succeeds is still an open question, but Baazov’s story is an untold saga of chutzpah, luck and pure perseverance. “The game of poker itself is like negotiating a transaction. This was a really, really big-stakes game.” And it’s only just begun.
For a guy who won about as big as you can win in the deal game, Baazov says he’s not much of a poker player. The son of a construction worker, he was born in Israel, and his Georgian parents moved him to Montreal at the age of 1. It was a tight-knit Modern Orthodox Jewish family with six children that tolerated Baazov’s strong rebellious streak–for a while. A math whiz, Baazov was bored at school and at 16 told his deeply conservative parents that he was done with it. They responded as well as you’d expect. They kicked him out of the house.
Filled with pride and desperately wanting to start something, Baazov did not back down. For a while he stayed with a friend, but soon found himself sleeping on park benches and in Montreal’s ubiquitous outdoor public hockey arenas, camping out in the penalty box to block the harsh winds. After more than two weeks on the streets in cold temperatures, Baazov used his brother’s driver’s license to rent an apartment. In time he made up with his parents and went on to make some early cash by selling packages of discount coupons for dry cleaning and clothing stores through the mail. Baazov eventually started a computer-reselling outfit in Montreal, renting a tiny office that maybe two people visited in the first five months. “Your conscience runs with your thoughts,” says Baazov. “You are thinking, what am I doing?”
His big break came when he landed a contract to sell computers to Montreal’s public library, expanding his operation into a $20 million computer reseller over the next five years. “He could take apart a computer and put it together with his eyes closed,” says Morden Lazarus, a Montreal lawyer who has known Baazov for years. “Like every Duddy Kravitz in this world, he wanted to be successful and for his family to be proud of him.” At 25, and fearing the direct computer sales model, he abruptly sold the company after losing a bid to Compaq, one of the companies he distributed for, to supply computers to the City of Montreal.
Burned by hardware, Baazov decided in 2005 to get into software, though he wasn’t much more focused than that. He brought in some developers and to generate revenue they built an electronic poker table that could be sold to casinos and cruise ships, essentially allowing people to play poker without a human dealer. He dubbed the company Amaya, a play on Avaya , the computer networking company where the sister of his chief financial officer worked.
With about $6 million in revenue, Baazov took Amaya public for just under $1 a share in 2010 on the Toronto Venture Exchange, Canada’s penny stock market, raising nearly $5 million. In preparing for his IPO, Baazov, then 29, secured a dinner meeting with former NATO commander and presidential candidate General Wesley Clark, who was a proponent of gambling-generated tax revenue, particularly in small countries. He returned from the Washington dinner and told his staff that General Clark would join the board. “Did he say he was joining?” his CFO asked him. No, but Baazov was certain he would. “He is the ultimate optimist,” says Marlon Goldstein, Amaya’s general counsel. “His glass is always half full even when it’s fu**ing crumbling.” General Clark signed up and remains on Amaya’s board.
Given this kind of bet-the-house bullishness, it was perhaps inevitable that Baazov would set his sights on the Wild West of online gambling. Because of its close proximity to the Kahnawake Mohawk Territory, which asserts sovereignty and has long hosted online gambling servers for offshore companies, Montreal has b een an online gambling hub. Running a tiny, publicly traded company, Baazov bought cheap and out-of-favor assets at steep discounts, like Chartwell Technology and Cryptologic, which provided casino-game software to online operators. Baazov also snapped up Ongame, a maker of online poker software. Critics couldn’t figure out what he was up to, but it was simple: He was building a story and a stock.
In 2012 he purchased Cadillac Jack, a slot machine maker, for $177 million. Now Baazov had cash flow, some $36 million a year. He also had a relationship with Blackstone’s GSO credit division, the largest financial backer of the Cadillac Jack purchase, raising $110 million in debt for the deal. Amaya’s stock soared from $3.50 in November 2012 to more than $7 by the end of 2013.
After buying Cadillac Jack, Baazov told his CFO, Daniel Sebag, that he had his eye on much bigger prey. He wanted to buy Rational Group, the private, secretive owner of PokerStars. “Please do not put even one minute of your time in that,” Sebag told him. It seemed impossible. Rational was not only many times larger than Amaya, it was known to be insanely profitable. Meanwhile, Amaya was losing money.
But Baazov smelled opportunity. PokerStars had been essentially founded and run by Isai Scheinberg, a Canadian with Israeli roots, and his son, Mark, who legally owned most of the company. Despite PokerStars’ financial prowess, the owners had run into legal problems for continuing to offer online poker in the U.S. after Congress passed the 2006 Unlawful Internet Gambling Enforcement Act.