RIV losses mount as
takeover talks end

Mar 14, 2006 4:28 AM

Investors looking for an early announcement on a major development for the Riviera Hotel/Casino in Las Vegas saw their hopes dashed last week with the revelation that talks with previously announced developers had fallen thru.

Filing a disclosure statement with the SEC, officials of Riviera Holdings Corp. (RIV) noted that discussions with a potential buyers’ group had been terminated "because no agreement was reached on the acquisition price."

And, the statement noted, the buyers "did not offer $17 per share."

Early this year, it was revealed that CEO Bill Westerman had sold a million shares, about half his RIV holdings to a group that included famed hotel magnate Barry Sternlicht, former chairman and CEO of Starwoods Hotels and Resorts Worldwide (HOT). With the announcement, the company indicated that the group would continue negotiating for the sale of more Westerman shares.

Now that the negotiations have been terminated, the company emphasized that Westerman had "no current plans or intentions to retire."

All the talk of the investment group came just prior to the company’s conference call to discuss the fourth fiscal quarter that ended on Dec. 31, 2005.

Although most Strip properties reported substantial gains during the period, the Riviera said its net revenues were $46.2 million, down $1.3 million or 2.8% from the corresponding period of 2004. Net loss for the quarter came to $3.9 million or $0.32 per share. A year earlier, the net loss was $1.5 million or $0.13 per share.

Bob Vannucci, president of Riviera Las Vegas said that an increase in room revenues was offset by lower profits in gaming and increased employee benefit costs. He added that entertainment competition from new and existing shows at Strip properties resulted in a 30% decline in tickets sold to the venue’s shows. "This 47,000 reduction in show patrons," he said, "also impacted our gaming revenues."

For fiscal 2005, the company had revenues of $202 million, an increase of $877,000 over the previous year. Net loss for the year increased to $3.999 million compared to $2.08 million in 2004. On a per share basis, this amounted to a loss of $0.34 each whereas in 2004 the loss per share was $0.20.

Following the report, analysts at Morgan Joseph Co. downgraded the RIV shares from its previous rating of "buy" to "hold."

Magna Entertainment

Looking to improve its operating picture, Magna Entertainment Corp. (MECA) announced it was forming a new company, PariMax, to consolidate all of its interactive betting channels. Joe De Francis, who with his family sold half of his holdings in the Maryland Jockey Club to MECA, was named CEO of PariMax.

The announcement was made following the company’s report that it had experienced a net loss of $39.7 million on revenues of $126 million. In the comparable quarter, the company had revenues of $121 million and a loss of $25 million. On a per share basis the loss from the 2005 quarter was $0.37 each while a year earlier it amounted to $0.38.

In fiscal 2005, the company had a loss of $119.8 million or $0.98 per share compared to $79 million and $0.89 per share.

With the formation of PariMax, the company will consolidate the following subsidiaries: XpressBet, a phone and online betting service; HRTV, a horse-racing television channel; MagnaBet, which offers online betting in several countries, and RaceOnTV, which broadcasts live races from Magna-owned tracks. The new company also will oversee Magna’s 30% ownership interest in AmTote, a supplier of totalizator wagering systems to racetracks across the country.