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David Baazov, former president and chief executive officer of gaming company Amaya Inc.

© Christinne Muschi / Reuters

David Baazov, former chief executive officer of Amaya Inc., scrapped his plan to take the Montreal-based online gambling company private after weeks of questions about the overseas investment firms behind the bid.

In a statement issued early on Tuesday, Mr. Baazov said the premium demanded by "certain shareholders" was more than he and his investors were willing to pay. His decision to walk away comes more than five weeks after his initial proposal. Since then, questions had arisen over whether his investors had the financial wherewithal to fund the $4.1-billion (U.S.) deal.

"The best course of action for me and Amaya would be for me to end my attempt to purchase the company," Mr. Baazov said in a release.

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He declined a request for further comment.

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Read more: David Baazov's exit helps Amaya move past former CEO's scandal

Shares of Amaya fell 2 per cent to close at $19 apiece on the Toronto Stock Exchange – about 60 cents above the level they were at before Mr. Baazov tabled his $24-a-share offer.

Amaya itself said little apart from issuing a brief news release confirming discussions with Mr. Baazov had been "terminated."

The ending of the uncertainty over the Baazov bid is a positive development for Amaya, observers said, and one that may finally allow the Pointe-Claire, Que.-based company to move beyond its controversial founder.

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In an interview with The Globe and Mail last week, Dimitry Khmelnitsky, an analyst with Veritas Investment Research Corp., said the lack of clarity over the bid was alienating key investors, creating confusion for employees and a distraction for management. "Most people are not interested in protracted uncertainty," Mr. Khmelnitsky said.

Only one of Amaya's major shareholders, SpringOwl Asset Management LLC, a New York-based hedge fund, had voiced public disapproval of the Baavov bid, but its objections were based on far more than price alone. In a letter sent to Amaya's board earlier this month, Jason Ader, CEO of SpringOwl, wrote that Mr. Baazov's offer "significantly undervalues" the firm.

Mr. Ader, whose New York-based hedge-fund company owns more than a million shares in Amaya, also urged the board to reject Mr. Baazov's proposal owing to the ambiguity of the financing package. "Consistent with Mr. Baazov's time as CEO of the company, his proposal lacks transparency," Mr. Ader wrote in a letter.

Mr. Baazov's attempt to take Amaya private was unusual from the get-go. His initial bid, announced Nov. 14., claimed that four overseas equity backers had put up $3.65-billion (U.S.) in financing. The firms, however, were virtually unknowns in the world of private equityand at least one firm denied being involved with the deal.

The head of KBC Aldini Capital Ltd. said the Dubai-based firm was never part of the deal, and that KBC's name was used fraudulently in regulatory filings. KBC filed complaint letters with the U.S. Securities and Exchange Commission and the Ontario Securities Commission, the company said.

Another sponsor, Ferdyne Advisory Inc. of the British Virgin Islands, was dropped from the syndicate with no explanation given, after The Globe and Mail reported that Ferdyne no longer appeared to be a going concern.

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Mr. Baazov filed an amended privatization proposal on Nov. 25, dropping both KBC and Ferdyne from the list of equity sponsors.

A separate Globe investigation revealed that the two remaining Hong Kong-based equity sponsors responsible for $3.45-billion (U.S.) in commitments had little or no track record in private equity, and had limited financial wherewithal. According to a regulatory filing, one of the sponsors, Head and Shoulders Global Investment Fund SPC, had only $59-million under management as of Feb. 29.

When Mr. Baazov first unveiled his offer, shares in Amaya rallied to just under $21 (Canadian) apiece. But in recent weeks, the stock had fallen as uncertainty spiked about the ability of Mr. Baazov to deliver on his proposal.

Earlier this year, Mr. Baazov stepped down as CEO after multiple insider trading charges were brought against him by Quebec's securities regulator, the Autorité des marchés financiers (AMF). None of the charges, which include stock manipulation in connection with Amaya's 2014 $4.9-billion (U.S.) acquisition of PokerStars, have been proven in court.

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