Colony Capital paying $4B for Fairmont

Jan 31, 2006 3:55 AM

In his early career as a young lawyer, Tom Barrack spent a couple of years in Saudi Arabia completing his business duties but also developing relationships among the Mideast country’s ruling family.

As he developed his company, Colony Capital L.L.C., into one of the world’s leading real estate investors, Barrack benefited from those relationships but probably none more obvious than in Monday’s announcement that he was joining with Prince Alwaleed bin Talal to buy Fairmont Hotels & Resorts Inc. (FHR) for nearly $4 billion.

Colony Capital, although primarily a real estate company, joined the gaming community in 1997 when it purchased the Harveys gaming properties in northern Nevada.

The company expanded its gaming enterprises by adding the troubled Resorts International Hotel/Casino in Atlantic City in 2001.

Pursuing further gaming interests in 2003, Colony Capital purchased the Las Vegas Hilton Hotel/Casino from the former Caesars Entertainment Inc. for $280 million. Success at the gaming properties encouraged Barrack to make a deal in April 2005 to buy four more casinos from Harrah’s Entertainment Inc. (HET) $1.24 billion. They were the Harrah’s Casino in East Chicago, Ind., the Harrah’s Casino in Tunica, Miss., the Atlantic City Hilton and the Bally’s Casino, also in Tunica.

The Fairmont deal, for what amounts to about $45 a share, was precipitated by pressure from another Las Vegas casino owner, Carl Icahn. After acquiring nearly 10% of Fairmont’s stock, he made a bid of $40 per share for the company. Icahn’s bid was rejected by the Fairmont board of directors.

Barrack’s partner, Prince Alwaleed is considered one of the world’s richest men and a major Wall Street investor. Among his holdings in the hostelry business are London’s Savoy Hotel and Geneva’s Hotel des Bergues. He and Barrack sold their interest in New York City’s Plaza Hotel to hotel mogul Donald Trump who is in the process of converting the facility to condominiums.

Heading the gaming operations for Colony Capital is the veteran executive Nick Ribis, who was affiliated with gaming companies in Las Vegas and Atlantic City before taking over the Trump casinos after that company’s first bankruptcy.

Lakes announcement

Investors reacted quickly Monday to the news that the federal government had agreed to take into trust a 675-acre parcel of land in Buffalo Township Mich., which has been designated as the home of an Indian casino.

The property will be developed by Lakes Entertainment Inc. (LACO) for the Pokagon Band of Potawatomi Indians.

Lakes Entertainment, largest shareholder in WPT Enterprises (WPTE), as well as a potential developer of Indian casinos in California and Oklahoma, has an agreement with the Pokagon Band to build and operate the Four Winds Casino Resort on the trust land.

THE INSIDER: Gaming analysts at Lehman Brothers have raised their recommendations of both Harrah’s Entertainment Corp. (HET) and Pinnacle Entertainment Inc. (PNK) to "overweight" from "equal-weight."

Meanwhile, Harrah’s announced that it would reopen the hotel, but not the casino, at its Lake Charles, La., facility on Feb. 1.

Progressive Gaming International Corp. (PGIC) has granted the exclusive right in the U.S. and non-exclusive rights outside the U.S. to Gaming Partners International Corporation (GPIC) for its RFID gaming chip.

Las Vegas Sands Corp. (LVS) says it opened its new "Level of Fortune" gaming area at its Sands Macao Casino in time for the Chinese New Year Celebration.

Because of a state appeals court ruling, Calder Race Course, a Florida racetrack owned by Churchill Downs Inc. (CHD), closed down its simulcasting operation with Gulfstream Park, another Florida track owned by Magna Entertainment Corp. (MECA).

Boyd Gaming Corp. (BYD) announced that it will open its new casino vessel in Michigan City, Ind., on Jan. 31. The new vessel replaces the older Blue Chip Casino Hotel.

The Colorado Lottery has awarded a $5.6 million contract to Scientific Games Corporation (SGMS) for its instant ticket needs.

A special committee of directors of MTR Gaming Croup Inc. (MTNG) has rejected a management-led proposal to take the company private with a two-phase buyout plan that would pay $9.50 per share in cash for at least 90% of the outstanding shares.

A parking garage magnate has withdrawn his application for a slots license in Pittsburgh saying he could not overcome the competition from Harrah’s Entertainment Inc. and Isle of Capri Casinos Inc.

Multimedia Games Inc. (MGAM) has rescheduled the release of its financial resorts for the period that ended on Dec. 31, 2005 to Tuesday, Feb. 7.

Navegante Search, an executive recruitment firm that is a subsidiary of Larry Woolf’s Navegante Group, has established a 10% recruiting fee for anyone who successfully refers a candidate to them. Division Director Marc Weiswasser calls the incentive program a "win, win, win," for everyone involved.