Impact of economy creating potential problems for Riviera deal, other potential acquisitionsA long-discussed sale of Riviera Holdings Corp. appears to be on the rocks thanks to a shaky economy and tightened credit markets, the company said in early March.
William Westerman, chairman and CEO of Riviera Holdings told the Las Vegas Review-Journal that the potential cost for a buyer to terminate a debt agreement, uncertain shareholder support and the threat of new slot competition in Colorado helped lead to the decision to end a review process the company was conducting to explore sale opportunities. During that process, 35 potential or targeted bidders were contacted about the potential to acquire Riviera Holdings, but no agreement was reached.
“We will continue to review all oppor-tunities and consider all proposals that we receive,” Westerman said during a recent earnings call with investors.
One company that is still reportedly interested is Riv Acquisition Holdings, an investment group made up of executives and investors with close ties to Riviera Holdings. The group made a $34-per-share offer in May of last year. In a Securities and Exchange Commission filing at the beginning of this year, Riv Acquisition Holdings indicated it was still looking to buy the company, though not at the original $34 a share bid.
Riviera Holding’s flagship product is its Riviera Hotel & Casino on the Las Vegas Strip. John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, told the Review-Journal that land values on the Strip were on hold as credit markets wait to determine what impact land holdings that changed hands last year would have.
“There is potentially more product out there than there was four months ago,” he said. “The impact is it’s more challenging for the Riviera to get $30 million per acre, which you could have argued four months ago was the value. Today, it’s clearly not the value.”
Knott said the Strip has a “pipeline of undeveloped holdings,” including 40 acres owned jointly by MGM Mirage and Kerzner Holdings International, 35 acres of the former New Frontier site owned by Elad Group and 27 acres of the former Wet ’n Wild site slated for Crown Las Vegas. There is also the potential for a major new development or series of developments on valuable land at the site of the Tropicana Hotel & Casino on the south end of the Strip.
“If you were going to do a deal today, you would have to scrutinize the buyer’s ability to get to the goal line,” Knott said. “Anybody who is going to require financing is going to have difficulty arranging financing right now.”