Full House rejects acquisition proposal from Z Capital Partners

Full House rejects acquisition proposal from Z Capital Partners

Wednesday, October 24, 2018 Posted by News Team
Rejection
Affinity Gaming owner had wanted to acquire operator in $132.5m deal

Nevada-based casino operator and developer Full House Resorts has rejected a proposal from Z Capital Partners, the private equity firm which owns rival casino operator Affinity Gaming, to acquire the business. 

The proposal would have structured the deal as a cash or stock transaction, giving Full House an enterprise value of $132.5m, or $1.79 per share on a fully diluted basis. The Full House business would have been combined with that of Affinity Gaming, and led by Affinity’s newly-appointed chief executive Tony Rodio. 

However Full House rejected the proposal in a letter written by chairman Bradley Tirpak and president and CEO Daniel Lee, saying the deal was not in the best interests of the company’s shareholders. 

It noted that Z Capital failed to specify a transaction structure or provide evidence of financing in its proposal.

“The price dramatically undervalues the company’s business and does not remotely reflect the company’s strategic value and future prospects,” the letter continued. “Our Board and management team see significant upside to the company’s current and recent trading prices based on already-completed capital projects across our existing portfolio, as well as established or prospective organic growth opportunities in Colorado, Indiana and New Mexico, among other places.”

Tirpak and Lee also pointed out that the acquisition price of $1.79 per share represented a material discount of 35% on the company’s closing price on October 19th, the last day of trading before the proposal was made. It also represented a 40% discounted to Full House’s volume weighted average price over the preceding three months. 

“This reflects a stark and fundamental disconnect from our Board’s understanding of the company’s value, as well as that of third party investors and analysts.”

“We would also note that any combination of Affinity Gaming and our company presents significant execution risks in light of the jurisdictional overlaps between Affinity Gaming and Full House Resorts.”

Tirpak and Lee added that they had only met Z Capital Partners representative Andrei Scrivens to explore the possibility of acquiring certain Affinity Gaming assets - and remained interested in doing so. 

However, they concluded, an acquisition of their business was out of the question: “Based on our review, we are fully confident that our strategic plan will deliver value for our stockholders far superior to the value your letter indicates. Accordingly, our board has no interest in pursuing what you propose.”

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