Stars Group’s conversion of preferreds wins court challenge

By Wendy Van Sickle

Columbus, Ohio, July 17 – Stars Group Inc. said the Ontario Superior Court of Justice ruled in its favor over the previously announced challenge of the company’s pending mandatory conversion of all of its outstanding convertible preferred shares.

As previously reported, Stars was served in June with a notice of application filed in the court by Polar Multi-Strategy Master Fund and Verition Canada Master Fund Ltd.

The court ruled in favor of the company in that challenge, and the conversion will proceed, Stars said in a Tuesday update.

As reported on June 5, the company elected to force the conversion of all of its outstanding convertible preferred shares.

The company said at that time that the conversion right was triggered on May 30 when the common share price and trading volume requirements entitling the company to mandatorily convert the preferred shares into common shares were met.

All of the preferred shares outstanding at the close of business on June 18 will be converted at a rate of approximately 52.66 common shares per preferred share.

Based on the 1,138,978 preferred shares outstanding as of June 5 and assuming no voluntary conversions prior to the mandatory conversion date, the mandatory conversion would result in the issuance of approximately 59.98 million common shares.

The preferred shares were issued on Aug. 1, 2014 at a subscription price equal to C$24.00 per underlying common share in connection with the Stars Group’s acquisition of its Stars Interactive Group online gaming division. The conversion ratio has increased at a rate of 3% every six months since issuance, resulting in incremental common shares issuable to the holders upon conversion.

More on legal challenge

The notice of application sought, among other things, a declaration of the court that the liquidity condition required for the mandatory conversion be based on the trading volume of Stars’ common shares solely on the Toronto Stock Exchange, as opposed to including trading volume from the Nasdaq Stock Market or any other exchange or trading platform.

Stars reiterated at the time of the notice of application that it believed that the liquidity condition had been met.

The liquidity condition, according to the company, required the average daily volume on any 20 trading days in a 30-consecutive trading day period to be at least 1.75 million common shares.

Stars said its common shares are cross-listed on Nasdaq as a result of a requirement in the preferred share terms to, within 15 months from the date of issuance of the preferred shares in August 2014, obtain and maintain a second listing on either Nasdaq, the New York Stock Exchange or London Stock Exchange.

Stars Group is a Toronto-based provider of technology-based products and services in the gaming and interactive entertainment industries.

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