Aqueduct Slots

Mar 23, 2010 7:09 AM

"Giving up and walking away is not an option," The Navegante Group’s Larry Woolf  was saying, offering a peek at the strategy being used in New York where he and his partners in the Aqueduct Entertainment Group have been laboring to overcome New York’s abrupt about face on the matter of AEG getting the right to operate some 4,500 slot machines at the Aqueduct racetrack.

Woolf’s Las Vegas-based company and its New York partners were awarded "preferred bidder" status weeks ago. Those partners figured they had the political and economic muscle to get the job done. Woolf had the gaming license and experience as a casino operator at the Niagara Falls casino on the New York-Canadian border.

But some of the minor shareholders (those holding less than one percent or so) began dropping away as they recognized how expensive and intrusive the licensing process might be. Some of them also had doubts about sensitive applicant information remaining private.

Licensing authorities stamped their feet, scowled and looked offended.

You can’t just quit, now that you’ve applied, the suddenly reluctant applicants were told.

Yeah, well just watch us, was the tone of some applicant responses.

Bureaucratic paranoia kicked in as the slot cops let their imaginations soar, wondering what kind of information those investors in fractional shares might be hiding.

The result: state officials who believed they had all the rules in place, decided AEG should lose its preferred bidder status. Would New York move on to the next bidder or maybe even re-bid the whole thing.

It looked like the nine years of efforts to put VLTs at Aqueduct, a process that has stretched through the terms of three governors, would not be ending any time soon.

Woolf says AEG has until March 31, to see if it can negotiate an acceptable path through the tangle of objections and red tape the state has thrown at the group.

What AEG has so far seen is a series of "arbitrary and capricious actions … If they think we’re gonna lay down," Woolf says, his voice trailing off, the tension and promise of action seems obvious in his tone. "If they try and move on to the next bidder then there is no one who can qualify."

That’s because the public companies partnered with other unsuccessful bidders are public companies with long lists of shareholders.

"They would have to investigate and approve all those owners, if they apply the same rules they used on us."

There’s another possibility, according to Woolf, maybe not a bad idea.

The so-called "procurement process" might be applied with the re-bidding turned over to an agency like the lottery to assess and grade each of the submitted bids.

Woolf believes this would take the politics out of the process.

Negotiations with the governor’s legal counsel are continuing in the meantime.

Rio to Penn?

Harrah’s may have focused even briefly on the importance of avoiding an active hand in the creation of unnecessary competition as it weighs offers for its casino properties, particularly those in Las Vegas.

The possibility of Penn buying the Rio reportedly put this issue in a spotlight. Both companies put a heavy emphasis on satisfying mid- market slot players. Harrah’s also reaches way beyond the mid-market in Las Vegas with facilities such as Caesars Palace, but both of them operate a number of regional casinos with an emphasis on slot play.

This regional competition will increase as the companies expand their respective spheres of influence in states such as Ohio and Pennsylvania.

One of the significant differences between the two companies in terms of their middle market merchandising is the fact Penn is building an impressive database but does not yet have a Las Vegas property.

I have no reason to believe this fact alone would cause Harrah’s to turn down Penn’s reported offer for the Rio. But at a time when competition is tough in all market niches the benefits of not creating new competition for slot players interested in a trip to Las Vegas may have crossed some minds at Harrah’s.