In the initial days of this month, AGS (PlayAGS), a foremost firm providing diverse gaming experiences to fuel the gambling sector globally, announced that it has formally agreed to be acquired by affiliates of Brightstar Capital Partners (Brightstar). Brightstar put forth a bid of $12.50 for each share, marking a 40% premium on AGS’s closing stock price as of May 8, 2024.
The proposed transaction, expected to transform AGS into a privately-held company, is esteemed at a staggering $1.1 billion. Despite the deal garnering unanimous consent from AGS’ Board of Directors, not all shared the same opinion on the proposal. This was the exact standpoint of an activist investor, holding roughly a 1.5% stake in PlayAGS stock, notably Emmett Investment Management LP.
This Tuesday, Emmett dispatched a letter addressed to the company’s shareholders, encouraging voting against Brightstar’s proposed acquisition that would convert AGS into a privately-held enterprise. Emmett, renowned globally as an investment manager for small and mid-cap market equities, opined that the offered price significantly undervalued AGS.
Emmett expressed its desire to communicate its apprehensions regarding the bid for AGS’s privatization to other stakeholders. It maintained that it doubted whether the proposed deal to privatize the company would benefit the shareholders optimally. As stated earlier, Emmett declared its decision to vote against the proposed corporate transaction.
“We are compelled to voice our concerns about the recently announced privatization proposal for AGS by Brightstar Capital Partners. We do not think the privatization suggests the best interest of shareholders, and we plan to vote against the proposal,“
conveys a letter dispatched by Emmett Investment Management LP
The Shareholder Raises Various Issues With the Acquisition Proposal
Emmett put forth its rationales against the agreement, highlighting that the proposal was made public just hours before AGS published its financial results for Q1, underlining key shifts in the company’s profile. It was pointed out that AGS reported a 21% boost in organic adjusted EBITDA, significantly surpassing industry standards.
The stakeholder also questioned the “approximate” transaction cost, valued at $1.1 billion, notwithstanding the fact that based on the bid per share, the actual worth was pegged at $1.06 billion. “In contrast, an enterprise worth $1.1 billion would imply an AGS share price of $13.40,” Emmett asserted.
Additionally, the stakeholder deemed Brightstar’s bid inadequate for not highlighting the upside for AGS likely ensuing from the IGT and Everi merger. This critical business amalgamation was featured in the company’s March Investor Presentation where AGS stated its expectation to capture greater market share in the aftermath of the high-profile merger. “Under Brightstar’s proposed deal, shareholders would be robbed of this substantial windfall,” Emmett contended.
In conclusion, while Emmett is not against propositions that could take AGS private it strongly resists any bid failing to recognise the company’s potential growth.
