Emmett Voices Concerns over PlayAGS Acquisition by Brightstar

Earlier this month, AGS (PlayAGS), the leading company offering a range of gaming experiences powering the gambling industry across the globe, confirmed it entered into a definitive agreement for an acquisition by affiliates of Brightstar Capital Partners (Brightstar). Brightstar offered a price of $12.50 per share, representing a 40% premium on AGS’ closing stock price as of May 8, 2024.

The deal, which is expected to take AGS private, is estimated at a whopping $1.1 billion. While the proposed acquisition received unanimous approval of the Board of Directors at AGS, not everyone agreed with the proposal. This is precisely the case of an activist investor with an approximately 1.5% share in PlayAGS stock, Emmett Investment Management LP.

On Tuesday this week, Emmett sent a letter to stockholders of the company, urging them to vote against the proposed acquisition by Brightstar that would take AGS private. In its letter, the company, which is known as an investment manager for small and mid-cap equities in markets across the globe, said it believes that the proposed bid was significantly below the value of AGS.

Emmett wrote that it wanted to share its concerns about the offer for AGS to go private with other stakeholders. The company wrote that it doesn’t believe that the proposed transaction that would take the company private would be in the best interest of the stockholders. As noted, Emmett confirmed its intention to vote against the proposed business transaction.

“We feel compelled to share with you our concerns about AGS’s recently announced take-private transaction with Brightstar Capital Partners. We do not believe the take-private transaction is in the best interest of stockholders, and we intend to vote against the transaction,“

reads a letter sent by Emmett Investment Management LP

The Shareholder Shares Multiple Concerns with the Takeover Bid

Releasing arguments against the transaction, Emmett wrote that the bid was announced hours before AGS released its first quarter results which highlighted transformative changes for the company. The stockholder explained that AGS reported organic adjusted EBITDA growth of 21%, which was “far outpacing the industry.”

It also argued about the “approximate” price of the transaction, which was estimated as $1.1 billion, when in reality based on the bid per share was valued at $1.06 billion. “An enterprise value of $1.1 billion, by contrast, would translate to an AGS share price of $13.40,” wrote Emmett.

Moreover, the stockholder deemed the bid from Brightstar unattractive for another reason, namely, that it doesn’t address the benefit for AGS which can potentially come following the merger of IGT and Everi. This strategic business combination was highlighted in the company’s March Investor Presentation with AGS confirming it expects to gain market share in light of the high-profile merger. “Under Brightstar’s proposed deal, stockholders will be deprived of this significant upside,” wrote Emmett.

Finally, Emmett wrote that it is not against offers that may take AGS private but rather opposes a bid that doesn’t recognize the company’s potential.