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Boyd buys Coast

Feb 10, 2004 7:06 AM

A half-century ago, two gaming icons ”” the late Sam Boyd and the energetic octogenarian Jackie Gaughan ”” worked together to promote the development of gaming in the Las Vegas valley.

So, to old timers, the merger of Boyd Gaming Corp. (BYD) and the privately held Coast Casinos Inc., announced on Monday, seemed like the proverbial marriage made in gaming heaven.

Boyd said it would merge the Coast facilities into the Boyd family of casinos by paying the Coast owners $495 million in cash and 19.4 million of newly issued Boyd shares, as well as assuming the Coast debt of $460 million. The transaction, described as "strategic" by Boyd President Donald Snyder, has been valued at $1.3 billion.

"I’ve known Michael Gaughan (chairman and CEO of Coast Casinos) for nearly 40 years, both personally and professionally, and he is one of the industry’s most respected business leaders," William J. Boyd, chairman and CEO of Boyd Gaming, remarked.

In a teleconference with investors and gaming analysts Monday morning, Boyd explained how he and Michael Gaughan first broached the subject of a merger in a casual conversation some 18 months ago. The conversations continued over the period but really "became heated" some three or four weeks ago. This culminated into an agreement that was reached "about 5:30 on Friday afternoon."

Representatives of both companies emphasized that the current employees of both organizations would be retained and that the entire management team of Coast Casinos had agreed to remain in their respective positions with Michael Gaughan heading the Coast Casinos team.

"When it comes to understanding and operating in the Las Vegas locals sector, most would agree that Michael is among the best in the business," Boyd said. "I am especially pleased that Michael and the Coast senior management team have agreed to remain with Boyd following completion of the transaction and will continue to run Coast’s operations with the same dedicated employees who have made Coast a success."

Gaughan issued a statement that said, "This is the right transaction at the right time for Coast and our employees. I have great respect for Boyd Gaming and its management team. Bill Boyd is among the most respected leaders this industry has ever seen.

"Our fathers worked together in Las Vegas nearly fifty years ago, and I am delighted to have the two of us come together at this time."

Michael Gaughan, who owns 31% of Coast Casinos, will become the second largest shareholder in Boyd Gaming behind Chairman Bill Boyd whose holdings exceed 26 million shares

The merger increases Boyd Gaming’s Las Vegas operations by adding the Barbary Coast, Gold Coast, The Orleans and the Suncoast to its existing holdings of the Stardust, Sam’s Town, Joker’s Wild and the Downtown properties of Main Street Station, the Fremont and the California.

Coast Casinos also has plans to build a $350 million property, the Southcoast, on the southern end of Las Vegas Boulevard. And, Boyd Gaming will soon be paying Harrah’s Entertainment Inc. $190 million for a riverboat in Shreveport, La.

Boyd’s other operations are in Mississippi, Illinois and Indiana while its premier property, the Borgata Hotel/Casino in Atlantic City, has been a huge success since its opening last July. The Borgata is a 50% partnership with MGM MIRAGE Inc. but is operated by Boyd personnel.

Following the merger, which will require approval of gaming regulators in the jurisdictions involved, Boyd said it expects to generate about half of its pro forma EBITDA (earnings before interest, taxes, depreciation and amortization) from its Nevada operations.

As for the speculation that Boyd planned to develop its 62 Stardust acres on the Las Vegas Strip, Snyder remarked that after absorbing the Coast operations later this year the company will be looking to announce a Stardust plan sometime in 2005.