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Ike blows a hole in Landry's deal

Sep 23, 2008 7:02 PM

Gaming Insider by Phil Hevener |

Golden Nugget boss Tilman Fertitta could only watch and probably grumble as Hurricane Ike blew away a reminder of his family’s past and forced him to rethink future strategy.

The Category 2 storm destroyed the Balinese Room, a Galveston, Texas, landmark where the Ferittta family first explored its early appetite for the gambling business.

The Balinese Room at the end of a 600-foot pier stretching into the Gulf of Mexico from the Galveston seawall and across from the Galvez Hotel, had survived other hurricanes but the storm surge and winds associated with Ike were too much for the building that was added to the National Register of Historic Places in 1997.

As for Ike’s impact on Tilman Fertitta’s future…

The Golden Nuggets in Las Vegas and Laughlin are owned by Houston-based Landry’s Restaurants, the national chain headed by Fertitta that controls 39 percent of the stock. This past summer he offered to pay $21 a share for outstanding shares. He wants to take Landry’s private.

But Ike blew a significant hole in the company’s earning power for the immediate future. The company had restaurants on the Galveston seawall and close to a quarter of its overall revenue is earned by restaurants in the Houston area, including Galveston and Kemah.

"This isn’t the same company it was when I made the ($21) offer," Fertitta said last week, responding to a what-will you-do-now question from a reporter.

Gaming and financial sources with an eye on Landry’s expect Fertitta to come back with an offer of something like $17 a share, but that is obviously just a guess.

As for the Balinese Room, Sam and "Rose" Maceo were the brothers most connected with its operation but several Fertittas began filling roles there before the club shut down in the late 1950s under pressure from the Texas Rangers who had been ordered by new Attorney General Will Wilson to close Galveston’s illegal gambling.

Much of Galveston and the surrounding area found no shame in the presence of the Balinese Room and other much smaller clubs. Longtime casino executive and Las Vegas resident Vic Vickrey who worked in the Galveston clubs for a number of years, remembers their popularity.

Vickrey says that the Balinese Room was certainly not the only club with a gambling operation. "What separated it from most of the other places was the fact it catered to the high-rollers. They took a pretty good look at you before they’d let a player through the front door and they had big name entertainers, people like Frank Sinatra and Peggy Lee."

Vickrey remembers the Rangers had a difficult time closing the Balinese despite pressure for action that originated in Austin because of its location at the end of the pier. Balinese Room operators were also well-connected locally. There was no such thing as a surprise raid and the gambling equipment was easily put away by the time the first Ranger made it to the door.

The club and others like it flourished for years in Galveston because the gambling business was a welcomed local industry, like a trip to Disneyland.

Bellagio sale in the works?

Will MGM sell the Bellagio to "the guys from Dubai?" one source was recently wondering.

Definitely not, is the word I get. It’s a response that in the world of publicly traded companies may only mean no one is ready to talk yet, but … there are a lot of good reasons for top officials in the two groups to be putting in some quality time together, a fact that may have contributed to some of the speculation.

A Dubai contingent was recently in Las Vegas and staying at the Bellagio. High on the list of things to do while they were here was a get-acquainted session with Nevada gaming regulators. Dubai World, the emirate’s "flag bearer in global investment," has bought a lot of MGM Mirage stock and will buy more as various groups of state regulators do all that’s necessary to stamp their okays on all the wheeling and dealing.

Another possible contributor to the speculation: MGM has a development deal with Mubadala Development, the investment arm for Abu Dhabi, another of the seven emirates (just up the "street" from Dubai) to operate MGM Mirage-branded hotels that will be owned by Abu Dhabi.

It would be no surprise if one of those properties is Bellagio, as MGM seeks to expand its hospitality division and get maximum mileage from company brands that have been racking up five-star and five-diamond awards for excellence from various rating groups.

For now, we’ll let time tell.