We’ve all taken bad beats at the poker table – but few will ever be nearly as big as the one suffered by PokerStars recently. PokerStars’ parent company, the Rational Group, is out $11 million after a deal gone bad with the Atlantic Club, an Atlantic City casino that the online poker giant had hoped to purchase.
Last week, a judge had issued a temporary restraining order to stop the owners of the Atlantic Club from seeking to sell the casino to a different buyer, after they backed out of the deal with the Rational Group. Rational blocked the Atlantic Club, saying the latter’s decision to back out of the deal while PokerStars’ gaming license was pending violated New Jersey law.
The Judge Rules
But a subsequent decision has now dissolved that restraining order, allowing the Atlantic Club to seek new buyers. According to the judge presiding on the case, it was clear that the contract was written to give both sides the option of backing out of the sale for any reason if Rational hadn’t obtained state approval by the end of April.
This came as a huge blow to Rational, which had already paid most of the purchase price for the struggling Atlantic City casino. Worse still, PokerStars won’t be getting a penny of that money back. The $11 million that was paid was intended to help the casino survive until the purchase could be finalized.
“We saved their butts,” a Rational Group lawyer told Superior Court Judge Raymond Batten. “And we got the short end of the stick.”
That $11 million was intended to be put towards the $15 million purchase price for the Atlantic Club. While this was an extremely low price for an Atlantic City casino – by far the lowest in the city’s history of legalized gambling – the Rational Group was also agreeing to fund a $32 million shortfall in the casino’s pension account for its employees, and was likely to spend as much as $40 million in renovations and upgrades to the property after purchasing the casino.
License to Steal?
According to the Atlantic Club, they backed out of the deal after realizing that Rational would have a difficult time obtaining a gambling license in New Jersey, due to their previous legal battles with the U.S. government and the outstanding charges against a handful of PokerStars executives. The American Gaming Association had also come out against the sale, the first time they had so intervened in a casino purchase.
PokerStars had hoped that purchasing the Atlantic Club could be their avenue into the recently regulated New Jersey online gambling market. For their part, it seems that the Atlantic Club is still looking at online gambling as a potential revenue stream going forward, with COO Michael Frawley calling it a “tremendous opportunity.”