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by: Glenn Haussman.
Another major casino company is going private in $8.8 billion buyout. Station Casinos announced this weeks its given the thumbs up on a definitive agreement with Fertitta Colony Partners LLC to allow the private equity firm to acquire all of Station’s outstanding common stock for $90 per share in cash.

Station Casinos Goes Private in $8.8 Billion Deal


Another major casino company is going private in $8.8 billion buyout. Station Casinos announced this weeks its given the thumbs up on a definitive agreement with Fertitta Colony Partners LLC to allow the private equity firm to acquire all of Station’s outstanding common stock for $90 per share in cash. This represents a premium of approximately 30% over the closing share price of Station’s common stock on December 1, 2006, the last trading day before disclosure of the initial offer made by FCP to acquire Station. The total value of the transaction is approximately $8.8 billion, including the assumption or repayment of approximately $3.4 billion of debt.

The Company’s Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors (the “Special Committee”), has approved the merger agreement and has recommended that Station's stockholders vote in favor of the merger agreement.

FCP is a new company formed by Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, Lorenzo J. Fertitta, Vice Chairman and President of Station, and Colony Capital Acquisitions, LLC, an affiliate of Colony Capital, LLC ("Colony"). FCP has received financing commitments which are sufficient to consummate the acquisition. Frank and Lorenzo Fertitta, Blake and Delise Sartini, and Colony have provided equity funding commitments. Affiliates of Deutsche Bank as lead lender and JPMorgan Chase Bank have provided debt financing commitments.

Under the merger agreement, Station may solicit acquisition proposals from third parties for 30 business days following the signing of the merger agreement. The Special Committee, with the assistance of its independent advisors, intends to solicit acquisition proposals during this period. There can be no assurances that the solicitation of acquisition proposals will result in an alternative transaction. Station does not intend to disclose developments with respect to this solicitation process unless and until the Special Committee has made a decision with respect to the alternative proposals it receives, if any.

A deal of this nature is no longer a surprise as many gaming companies are looking to get away from the scrutiny of public markets. As Wall Street investors take eagle eye interest in quarterly profits, it makes it more challenging for companies to invest in the future. This is especially true in a world where it takes at least $1 billion to develop a property that grabs consumer attention.

"With private equity, a company can be longer sighted, without the short- term pressure," Dan Ahrens, president of Aherns Advisors in Dallas told Bloomberg News. "There has been a great deal of private- equity interest in gaming."

The transaction is expected to be completed in approximately six to nine months, subject to regulatory approvals and customary closing conditions. It is not subject to a financing condition. The transaction also is subject to the approval of the merger agreement by (i) 66 2/3% of the outstanding shares of common stock entitled to vote at a special meeting of stockholders and (ii) a majority of the outstanding shares of common stock (excluding shares held by FCP, Frank and Lorenzo Fertitta, Blake and Delise Sartini and their respective affiliates) present, in person or by proxy, and voting at such meeting. Such excluded stockholders currently own approximately 25% of the outstanding shares of common stock of the Company.

Station intends to pay stockholders its regular quarterly dividend of $0.2875 per share in accordance with the terms of the merger agreement until the transaction closes. In connection with the proposed merger, Station will file a proxy statement with the Securities and Exchange Commission.

And casino industry stocks continue to be tops on Wall Street.

"All casino operators remain in play and should continue trading at or above the high end of their historical valuation range," David Katz, an analyst at CIBC World Markets in New York, wrote Monday in a research note.

© Copyright 2007 Glenn Haussman's material. It may not be published, broadcast, rewritten, or redistributed.

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