- BIZ LINE: UFC OWNERS BID $4.7 BILLION TO BUY BACK STATION CASINOS

December 7, 2006
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by Ivan Trembow – MMAWeekly.com
Frank Fertitta III and Lorenzo Fertitta, the majority owners of the UFC, are attempting to take their multi-billion-dollar Station Casinos empire private with a $4.7 billion buyout offer.

The newly-formed Fertitta Colony Partners LLC, which includes Frank Fertitta III, Lorenzo Fertitta, and Colony Acquisitions LLC, has made an all-cash offer of $4.7 billion to buy Station Casinos, which equals $82 per share for all of Station Casinos’ current shareholders.

Station Casinos, which has been publicly traded for 13 years, would be a privately owned company if the buy-out attempt is successful.

In addition to being the majority owners of Zuffa, the company that owns the UFC, the Fertitta brothers hold senior management positions at the company that their family founded. Frank Fertitta III is the Chairman and CEO of Station Casinos, while Lorenzo Fertitta is the Vice Chairman and President of Station Casinos.

In the first nine months of 2006, senior management at Station had already bought back nearly 13 million shares of Station Casinos stock for approximately $880 million.

The Station Casinos empire includes the $500 million Green Valley Ranch, which opened in 2001 and is a joint venture with the Greenspun family; and the new Red Rock Casino Resort & Spa, which opened in April of this year and cost $925 million, according to Bloomberg News. Station Casinos also owns numerous other casinos and manages the Thunder Valley Native American Casino near Sacramento, California.

As Bloomberg News noted (albeit with some “no holds barred” hyperbole), “The Fertitta brothers also own the Ultimate Fighting Championships, a no-holds-barred martial arts competition.”

The brothers can usually be seen near the Octagon during UFC fights and in the Octagon after main event fights, and they were also both sitting in the front row at Pride’s United States debut show on October 21st.

As reported by Bloomberg, “Taking the company private means the Fertittas avoid investor questions about their management decisions as they build in the fast-growing Las Vegas market.” Chuck Akre, the CEO of Akre Capital Management, said that the buy-out offer would give the Fertittas “greater economic gain and less public scrutiny.”

Financial analysts have indicated that even more valuable than the company’s current casino properties is the land that the company is currently holding for development, which is worth $997 million to $1.4 billion, according to the company’s own estimates.

In an interview with Business Week, financial analyst Jeffrey B. Logsdon said that he believes the $4.7 billion bid for complete ownership of Station Casinos is a fair price. Logsdon said, “Although a bid for Station could go higher, minority shareholders would have to make a convincing argument that the company’s land holdings value is higher than management’s estimates.”

A Forbes.com article on the $82 per share buy-out offer stated, “Analysts predicted that the deal would quickly be consummated and that the company, while recently experiencing some difficulties, will ultimately profit from a healthy Sin City economy.”

According to the Associated Press, Susquehanna Financial Group analyst Robert LaFleur “sees the strong insider position of the Fertittas as decreasing the odds of an outside offer [to buy Station]… while he thinks shareholders could apply pressure for higher bids, LaFleur doesn’t see it going beyond the $84 to $86 per share range.”

Though the buy-out is expected to be completed at some point, three lawsuits stemming from the proposed buy-out have been filed in Clark County District Court, according to In Business Las Vegas.

Station Casinos shareholders Walter and Rita Goldmann, Helen Roessler, and Charles Traynor are suing Station, Fertitta Colony Partners, Frank Fertitta III, Lorenzo Fertitta, and several Station board members for breach of fiduciary duty.

These shareholders are seeking to form a class-action suit and have alleged that the proposed purchase price of $4.7 billion for Station Casinos is “unfair and grossly inadequate because, among other things, the intrinsic value of Station Casinos common stock is materially in excess of the amount offered, given the company’s growth and anticipated operating results, net asset value and future profitability.”

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