Eyebrows were raised last week in New Jersey when Colony Capital announced it was joining with a Saudi prince to buy the Fairmont Hotels & Resort Inc. (FHR) for $4 billion.
The reason for the unusual interest was detailed in a lengthy report filed by the Newark Star Ledger. It dealt with Colony Capital’s financial situation following the acquisition of four casinos from Harrah’s Entertainment Inc. (HET).
The Los Angeles-based company, headed by Tom Barrack, became the country’s largest privately held casino company when it purchased four properties — the Hilton in Atlantic City, two casinos in Tunica, Miss., and another in Indiana — for $1.24 billion.
Prior to the purchase, the company had shown success in its operation of the Resorts Hotel/Casino in Atlantic City and the Hilton Las Vegas. It also had pocketed a huge profit in the purchase and later sale of Harveys Casino in Lake Tahoe, Nev.
But, according to the newspaper report, the Harrah’s acquisitions soon started performing so poorly that Resorts International Holdings, the name given to the properties, failed to generate sufficient cash flow to meet its debt requirements.
Analysts were quoted as suggesting that when the Harrah’s name was removed from the properties its loyal customer base moved on to other gaming facilities.
Eric Hausler of Bear Stearns was quoted as saying, "Harrah’s has a very aggressive database, and when you unplug from a big company with lots of shared infrastructure, you tend to see a falloff in revenue. The properties face tough competition. It will take awhile to reposition them."
Company officials reportedly declined comment.
The report indicated that Colony Capital has entered into talks with lenders in attempt to ease the problem.
Looking for help
WPT Enterprises, the developer of the World Poker Tour whose share price has been languishing since a short-lived, and unsubstantiated buyout offer failed to materialize, is seeking outside help to develop its future course.
The company announced it has hired Thomas Weisel Partners LLC to "explore growth strategies, including the possibility of selling or merging the company."
The announcement caused an immediate rise in the company’s shares, moving them up to $7.59 before falling back to the mid-$6 range.
When an offer to buy out the company was made last July, the company’s shares skyrocketed to $29.50. Reportedly, the offer, that carried the name of legendary poker player Doyle Brunson, is being investigated by the Securities and Exchange Commission.
Boyd Gaming Corporation (BYD) announced on Monday that is acquiring a 40-acre "fully-entitled casino site" in North Las Vegas. Purchase price was given as $35 million.
The property is located on the southwest corner of the intersection of Lamb Boulevard and Centennial Parkway.
Said Bill Boyd, chairman and CEO, "Growing our strong franchise in the Las Vegas locals market has been a significant priority to our company. This site is very well situation in a major growth corridor in the northwest part of Las Vegas with a location that is a perfect complement to, and not in conflict with, our other properties that serve Las Vegas locals."
Boyd added that he expected work on the development to begin next year.
Last month, the company announced plans for a $4 billion development on the site of the Stardust Hotel/Casino on the Las Vegas Strip.
Columbia Sussex Corp., owner of the underperforming Belle of Orleans casino in New Orleans, is contemplating moving the boat to another location.
Last week, parish officials said they had been contacted by Columbia Sussex about a possible move for the boat that suffered severe damage during Hurricane Katrina. The boat is being repaired at a shipyard in Mobile, Ala.
No further details were provided by parish officials although they indicated the owners of the riverboat planned to discuss the matter with the Louisiana Gaming Control Board.
Columbia Sussex also owns the riverboat Belle of Baton Rouge in Baton Rouge, La.
THE INSIDER: The New York State Lottery has awarded a three-year contract for instant tickets and services to Scientific Games Corporation (SGMS). The contract begins on May 21.
MGM MIRAGE Inc. Chairman and CEO Terry Lanni told Reuters news service that his company is considering a multi-use development in Atlantic City.
Nevada casinos won a record $11.65 billion in calendar 2005 on total wagers of $162.2 billion, according to the Nevada Gaming Control Board. The win was an increase of 10.3% over 2004. In December, gaming revenue reached $907.4 million, an increase of 6.5% over the corresponding period.
Helped by warmer weather than usual, Atlantic City casinos reported their biggest-ever January take. It amounted to $406 million, a jump of 11.6% over the previous year.
Analysts at Brean Murray have initiated coverage of Multimedia Games Inc. (MGAM) with a "strong buy" rating.