Boyd Gaming Corp. announced that it delivered a non-binding preliminary indication of interest to the Board of Directors of Station Casinos, Inc.
In a letter from Boyd President and CEO Keith E. Smith to Station Casinos Chairman Frank J. Fertitta III that was posted on Boyd Gaming’s Web site, the offer is about $950 million for Station’s “OpCo” casinos, which include Texas Station, Santa Fe Station and the company's Fiesta casinos, according to a report from the Las Vegas Sun.
The rationale behind the “Preliminary Indication of Interest,” according to the Boyd statement is that: “We believe that Boyd is uniquely qualified to operate the assets of Station. We are dedicated to operating first class casino entertainment facilities and have demonstrated this commitment within the Las Vegas market for over thirty years.”
Boyd said that it had approximately $2 billion in available liquidity under its Revolving Credit Facility, which is “sufficient liquidity to finance a cash transaction consistent with the terms outlined” in the proposal.
The offer comes at a time when Station is expected to file bankruptcy. The company’s bondholders are set to vote on the company's reorganization plan next week.
The full text of the Indication of Interest delivered to Station follows:
- February 23, 2009
- Board of Directors
- Station Casinos, Inc.
- 1505 South Pavilion Center Drive
- Las Vegas, NV 89135
- Attention: Frank J. Fertitta III, Chairman, President and Chief Executive Officer
Boyd Gaming Corporation ("we" or "Boyd") is pleased to submit this non-binding preliminary indication of interest (a "Proposal") with respect to Station Casinos, Inc. ("Station" or the "Company").
Boyd is interested in exploring an acquisition of 100% of the OpCo Assets. In addition, should the Company determine to pursue sale transactions with respect to the PropCo Assets, we would consider an acquisition that includes those assets as well. The terms "OpCo Assets" and "PropCo Assets" are defined below under the heading "General."
We believe that Boyd is uniquely qualified to operate the assets of Station. We are dedicated to operating first class casino entertainment facilities and have demonstrated this commitment within the Las Vegas market for over thirty years.
Key Assumptions and Value Drivers
This letter is based on publicly available information. We have made numerous assumptions concerning the OpCo Assets, the PropCo Assets and the Land Loan (defined below under the heading "General"). These assumptions include continued operation of the business in the ordinary course.
There are certain key drivers and assumptions that may change our views, either positively or negatively, which we plan to further investigate during a formal due diligence process.
Based on available public information, we estimate that the enterprise value of the OpCo Assets is approximately $950 million. Subject to the completion of a due diligence review to Boyd's satisfaction, including confirmation of the estimated enterprise value of the OpCo Assets, Boyd would be prepared to offer this amount in cash to existing stakeholders to acquire the OpCo Assets following, or as part of, the reorganization of Station. We believe this value would present a superior recovery to the unsecured creditors of Station versus the current Exchange Offer as outlined in the Company's Form 8-K filed on February 4, 2009. We would be interested in pursing a transaction to acquire the Station assets as either a "stalking horse bidder" pursuant to Section 363 of the Bankruptcy Code or, as a co-sponsor or plan proponent (with Station or other applicable debtor) in a consensual plan of reorganization or, in the alternative, as a competing plan proponent, in each case pursuant to Chapter 11 of the Bankruptcy Code.
As of December 31, 2008, Boyd had approximately $2 billion in available liquidity under its Revolving Credit Facility. We have sufficient liquidity to finance a cash transaction consistent with the terms outlined in this Proposal.
Conditions and Approvals
Boyd considers the publicly available information to be very limited, and completion of detailed due diligence may lead us to substantially modify this Proposal or to decide not to make a binding offer.
Boyd envisions that any binding offer would be subject to the satisfaction or waiver of customary conditions, including, the completion of a due diligence review to Boyd's satisfaction; the negotiation and execution of definitive agreements containing terms and conditions satisfactory to Boyd; obtaining all required governmental, regulatory and third-party approvals or consents; and confirmation of the Plan of Reorganization by the Bankruptcy Court pursuant to the provisions of the Bankruptcy Code, or approval of a purchase of the OpCo Assets pursuant to an order of the Bankruptcy Court, among other conditions.
In order to be in a position to deliver a binding offer, we will need to meet with Station's key managers and visit Station's casino properties. In addition, we and our advisors will need to complete customary commercial, operating, equipment condition, financial, tax, business integration, environmental and legal due diligence. We are confident that we will be able to complete our due diligence expeditiously once detailed due diligence information is made available to us. In doing so, we will seek to minimize any disruption to the business of the Company.
The submission of this Proposal has been approved by Boyd's Board of Directors, and the Proposal has the full attention of Boyd management. We are prepared to commit the necessary resources to complete a transaction as quickly as possible. Boyd's financial and legal advisors are prepared to immediately commence the due diligence process and proceed expeditiously. Following execution of a definitive purchase agreement, we anticipate consummating a transaction promptly following receipt of all required consents and approvals, including those approvals required by the Bankruptcy Court and the Nevada Gaming Commission, Nevada Gaming Control Board and other regulatory bodies.
Boyd has retained UBS Securities LLC as its financial advisor in connection with its evaluation of Station. Responses to or questions regarding this non-binding Proposal should be directed to:
- James Stewart
- Managing Director
- UBS Securities LLC
- Phone: 310.556.6720
- Soren Reynertson
- Managing Director
- UBS Securities LLC
- Phone: 212.821.3467
For purposes of this Proposal, "OpCo Assets" means all of Station's assets other than (i) the assets that secure the CMBS mortgage loan and related mezzanine financings, due November 12, 2009 (the "PropCo Assets"), and (ii) the assets that secure Station's $250 million delay-draw term loan due February 7, 2011 (the "Land Loan").
This Proposal is a non-binding indication of interest only, and does not constitute a binding or enforceable agreement to consummate, or to negotiate, submit a binding offer or otherwise proceed with, any transaction. We will be legally bound only when and if we execute a definitive agreement in form and substance satisfactory to Boyd and subject to the conditions contained therein. This letter does not create a binding legal obligation on Boyd to make a binding offer, enter into a definitive agreement, complete any transaction or in relation to any other matter. Among other things, any legal obligation binding on Boyd will be subject to approval of our Board of Directors and execution of a definitive agreement satisfactory to us in our sole discretion.
We are enthusiastic about the opportunities presented by our Proposal and we look forward to hearing from you at your earliest convenience.
Boyd Gaming Corporation