Wyoming court dumps race bet machines

Jun 21, 2005 5:01 AM

The legality of "instant race machines" has been debated for the past three years by gaming regulators and law enforcement officials in Wyoming with each side having its supporters. But that won’t be the case in Laramie County where a judge last week branded the machines as gambling devices that violated the law.

Taking the biggest hit by the decision of Judge Edward Grant’s ruling was Wyoming Downs racetrack and the machines operated by owner Eric Nelson, the Las Vegas businessman who expanded his auctioneering interests into race tracks about a decade ago.

"Instant race machines" are devices that allow players to bet on previously run horse races but not on the horses themselves. Players are not given the names or standings of the horses they are betting on. Races often are simulcast at playing locations, and players find out after the race whether they’ve won.

The machines were introduced to Wyoming in 2002. At that time the state Pari-Mutuel Commission ruled that they were legal.

The ruling didn’t sit well with state attorney general Pat Crank who issued an opinion challenging the legality of the machines. This led to Judge Grant’s ruling. However, that decision does not affect the machines now being used in both Sweetwater and Uinta Counties. Those machines will continue operating until further legal action is taken.

Earlier this year, Nelson was successful in getting both the House and Senate to pass a bill that would legalize instant race bets and the machines that make them possible but Gov. Dave Freudenthal vetoed the bill.

Nelson says he will appeal the judge’s ruling and will continue to push for legalization of the machines.

Shares downgraded

Shares of MGM MIRAGE Inc. (MGM) that have risen in value since the company’s recent acquisition of Mandalay Resort Group were downgraded by analysts at Merrill Lynch last week.

Analysts said they could see little upside value since the shares had reached their $42 target. They felt it was time to reduce the rating from "buy" to "neutral."

"Even after raising our estimates today to reflect the strong operating environment in Las Vegas," they said in a written report, "we arrive at a theoretical value of $45 a share, which offers 8% upside. We believe the limited upside warrants a "neutral" rating."

For the years 2005 and 2006, the analysts raised the their earnings per share estimates from $1.56 to $1.65 and from $1.95 to $2.06.

Separate Ways

Seeing little growth in admissions at his riverboat in Gary, Ind., casino operator and developer Don Barden is looking to cut the umbilical chord that has combined his Majestic Star with Donald Trump’s riverboat. The two boats have shared an entrance pavilion along Lake Michigan since they were first licensed.

In a newspaper interview recently, Barden, owner of the Fitzgerald’s Hotel/Casino in Downtown Las Vegas, was quoted as saying, "I just withdrew an offer to purchase the Trump casino (and) I’m going to explore another alternative with respect to reconfiguring the layout."

Now, Barden is considering moving his vessel to the eastern side of the entrance dock and building a new pavilion, parking garage and entrance way in hopes of increasing the riverboat’s financial performance.

As for buying the boat owned by Trump Hotels & Casino Resorts, Barden said simply they "wanted too much."

Options opposed

A proposal by Archon Corp. (ARHN.OB) to grant options to family members of company chairman Paul Lowden has resulted in possible legal action being taken by a company stockholder.

In a letter to the Securities and Exchange Commission, David E. Shaw of D.E. Shaw Laminar Portfolios LLC expressed outrage that the company’s board of directors had authorized the granting of 150,000 stock options each to David Lowden, Paul Lowden’s brother, and Christopher Lowden, Paul’s son. They were identified in a proxy statement to stockholders as the company’s real estate projects manager and director of design and development, respectively.

Shaw’s privately held company owns both common stock and preferred stock. Paul Lowden owns 76% of the company’s common stock and he has indicated he plans to vote in favor of the options plan. The lightly-traded Archon shares were listed Monday as trading in the $28 range. The exercise price for the options will be $1.

Shareholders have been invited to the annual meeting to be held at the company’s Pioneer Hotel and Gambling Hall in Laughlin, Nev., on June 30.

Two new compacts

Continuing his efforts to extract more revenue from licensed Indian casinos, California Gov. Arnold Schwarzenegger has agreed to permit two of the state’s largest tribes to build casinos.

The Yurok tribe in Del Norte County, with 4,000 members, will be permitted to build a casino with 350 slot machines. The tribe has agreed to pay the state 25% of its revenues.

In Imperial County, the Quechan tribe will be permitted to build a casino with 1,100 slot machines. The 3,000-member tribe also has agreed to provide the state with 25% of its revenues.

Meanwhile, the Lower Lake Rancheria Koi Nation has scrapped its plans to locate a casino in the city of Oakland.

A national research firm has recently determined that California tribal casinos dominate the Indian gambling industry with $5.3 billion in revenue. The state was followed by Connecticut with $2.2 billion.

VLT contract

As indicated a week ago, MGM MIRAGE Inc. (MGM) has cleared its contract with the New York Racing Association (NYRA) to build a $170 million video lottery terminal facility at Aqueduct in Queens, N.Y. Only approval from the state’s gaming regulators, which is expected, is needed to have the project go forward after nearly three years of delay.

Legislative hang-ups and problems between NYRA and the horsemen’s association over distribution of racino revenues kept the project from going forward.

Analysts have estimated that the facility will mean EBITDA (earnings before interest, taxes, depreciation and amortization) of between $10 million and $15 million and could be worth between $0.02 and $0.03 per share in earnings.

THE INSIDER: Two companies have listed the dates and times for their earnings reports. Isle of Capri Casinos Inc. (ISLE) will report at 7:30 a.m. PDT on Friday, June 24, and Scientific Games Corporation (SGMS) at l p.m. on July 28.

The Seminole Indians in Florida have a date with Gov. Jeb Bush to discuss the use of Class III slot machines at the Indian casinos. The Seminoles cite the recent results of a slot machine referendum as justification of the machine upgrade.

Singapore officials have delayed until the third quarter of 2005 as the deadline for choosing the recipients of two gaming licenses that are up for grabs. There are a dozen bidders for the licenses but officials said it will need more time to review the proposals.

Penn National Gaming Inc. (PENN) has notified the Securities and Exchange Commission that it has entered into employment agreements with William Clifford, CFO, and Jordan Savitch, senior vice president and general counsel. The agreement sets the salaries as: Clifford, $500,000, and Savitch, $365,000.