Mikohn taps Jefferies for advice on enhancing value

Feb 12, 2002 6:35 AM

Mikohn Gaming Corporation (MIKN), the Las Vegas-based manufacturer of gaming devices, software systems and signage, has asked for guidance from an investment banking firm as to developing its future.

According to a Monday announcement, the company has engaged Jefferies & Company Inc. of Los Angeles, to assist the company “in developing and analyzing strategic alternatives to enhance stockholder value.”

Commenting on the move, Dave Thompson, Mikohn’s chairman and CEO, said, “Consistent with management’s primary responsibility of optimizing value for our stockholders, we have engaged Jefferies as financial advisor to assist us in developing a wide range of strategic alternatives and in evaluating them.

“These may include mergers, acquisitions or other potential business combinations, as well as the possible sale of operating units and product lines which no longer fit our strategic objectives.”

During the past decade, Mikohn has become a diversified supplier to the casino gaming industry worldwide, specializing in the development of innovative products with recurring revenue potential. The company develops, manufactures and markets an expanding array of slot games, table games and advanced player tracking and accounting systems for slot machines and table games. It also has been among the leaders in visual displays and progressive jackpot technology.

Among its portfolio of licensed properties are: Yahtzee, Battleship, Monopoly, Clue and Ripley’s Believe It or Not.

Jefferies & Company provides trading executive in equity, high yield, convertible and international securities as well as fundamental research for institution investors. As an investment bank, Jefferies offers capital raising, mergers, acquisitions, and restructuring services for middle-market companies.

The approval path

While Kentucky racetracks are hoping to put slot machines on a fast track, some state officials have adopted the opinion that the approval can only come from a statewide referendum.

The question being posed is whether the state can legislatively approve the installation of slots at the tracks and expand gaming in other areas or whether it would be a constitutional amendment that would require ballot approval.

“It’s got to be a constitutional amendment,” stated Atty. Gen. Ben Chandler. “The Kentucky Constitution specifically says that lotteries are prohibited.”

Chandler’s opinion has the support of both the speaker of the House and the Senate president. But, track operators want the lawmakers to decide the issue.

Won’t matter, says a constitutional law professor at Northern Kentucky University. “I think either way it’s tried, somebody will take it to court. And the courts will have a close question on their hands,” said Ken Katkin.

During the weekend, officials from several tracks lobbied lawmakers, pointing the successes experienced by racetracks in other states that had added slot machines to their gambling mix. They indicated they would be prepared to present a bill authorizing the installation of video lottery terminals sometime this week.

Macau’s decision

To the surprise of most observers, two independent Las Vegas casino operators were chosen as winning bidders for gaming licenses in the Chinese enclave of Macau.

Steve Wynn, founder of the Mirage Resorts and the developer of the Desert Inn property, and Sheldon Adelson, operator of The Venetian Hotel, Resort and Casino, were designated, as was heavy-favorite Stanley Ho, who has had a gaming monopoly in Macau for the past two decades.

Chosen as first and second “alternates” were Park Place Entertainment Corp. (PPE), and MGM MIRAGE Inc. (MGG).

There were 21 original bidders for the licenses. That group was reduced to 18 before interviews were held and later to nine and then to five.

In making their choices, Macau officials said they expected the Las Vegas-styled casinos would be a big boon to the conclave’s economy.

Wynn owns 90% of his project while 10% is held by a Macau resident.

Adelson’s project is a consortium involving investors from both Hong Kong and Macau.

The winning bidders must now negotiate the formal terms for their operations. If these negotiations are not successful, Macau officials will then turn to the alternates.

Raising the red flag

When Pinnacle Entertainment Inc. (PNK) received Louisiana’s 15th and final riverboat casino license late last year, the company said it would construct a $225 million project that would be the finest in the state.

Plans called for a casino as well as a resort hotel and a championship golf course in Lake Charles.

But, then the competitive problems developed. First, Boyd Gaming Corp. (BYD) was successful in acquiring Delta Downs racetrack in nearby Vinton, and was granted authority to install 1,498 slots. Then, Gov. Mike Foster announced that he had signed a gaming compact with the Jena Band of Choctaws. The Indians said they were looking for a piece of land in Vinton to build a casino.

“Potentially,” said Pinnacle president Paul Alanis, “the Indian casino development could destroy the entire Lake Charles market.” The company, as well as other gaming operators in the area, are hopeful the federal government will reject the Jena compact.

The taxman cometh

Since the border crossing problems hindered Americans from going to Casino Windsor, across the Detroit River, the city’s three casinos have been advertising that they offered, “Fun without borders,” or “more excitement, fewer miles,” and even “Play in the USA.”

To counter the campaigns that have resulted in a decline of 20% in Casino Windsor’s revenues, the Canadian property has begun a campaign advertising “Tax-free winnings in Canada.” Thus, noting, that Canada does not tax gambling winnings as does the U.S.

That has prompted the Internal Revenue Service to get involved saying the ads were misleading.

“If you’re a Canadian citizen, good for you, you don’t have to pay taxes on your gambling winnings. But, if you’re a U.S. citizen, you do, and we just hope that everybody will understand that and not be misled,” said an IRS spokesperson.

But, the U.S. payment requires the citizen to declare the gambling profit because there will be no record forthcoming from the Canadian authorities.

In other words, “let your conscience be your guide.”

The Insider

Interlott Technologies Inc. (ILI) has been selected by the Oregon Lottery to provide instant ticket vending machines.

Standard & Poor’s has raised the corporate credit ratings for International Game Technologies (IGT) to investment grade status.

So where do they go from here? A federal judge has ruled that the Detroit process of awarding the three gaming licenses provided for in a Michigan law, was improper. Lawyers involved in the casinos must now submit briefs suggesting what action should be taken.

Groundbreaking took place last week for a $140 million expansion of the Orleans Hotel/Casino owned by Coast Resorts Inc. Michael Gaughan, company chairman, said the plans include a 9,000-seat arena that will have a variety of uses.

Gov. Frank O’Bannon of Indiana has indicated that he will go along with legislation that would permit riverboats to have dockside gaming.

Paul-Son Gaming Corp. (PSON) says it has settled a lawsuit filed by a former company executive regarding compensation. No financial details were given.

Bill Schmitt, chief gaming analyst for CIBC World Markets, has announced a “strong buy” rating for Boyd Gaming Corporation (BYD).

Gaming revenues for the states of Iowa and Illinois increased during the month of January. Iowa reported a jump of 8.7% to $76.8 million for the period while Illinois said its revenue increased 6.4% to $151.5 million.