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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Affinity Gaming rejects buyout offer from Z Capital

26 May 2015

Casino operator Affinity Gaming formally rejected a buyout offer proposed by the company’s largest shareholder, saying the price was too low.

In a letter to James Zenni, the CEO of Illinois-based Z Capital Partners, Affinity board member Matt Doheny said the offer of $9.75 per share “significantly undervalues” the company. Las Vegas-based Affinity, which owns 11 casinos in four states, filed the letter with the Securities and Exchange Commission.

Doheny said a special committee of the board evaluated the offer, made by Zenni in early April, but came away believing the company could fetch a higher price on the open market.

“Z Capital would need to materially increase the per share price in the proposal to make it attractive based on the special committee’s evaluation,” Doheny wrote.

Z Capital already controls a 39.5 percent stake in the company, which owns the three Primm properties and the off-Strip Silver Sevens. Zenni is a member of Affinity’s board.

Doheny wrote that Affinity might find a better sales offer “through a process that is designed to give all interested parties a meaningful opportunity to potentially acquire the company.”

Z Capital’s offer expired earlier this week. The firm sent a letter to Affinity recommending that the company be sold, saying the casino operator “has seen no meaningful board leadership or value creation for shareholders” since it was created in 2010 after the bankruptcy reorganization of Herbst Gaming.

Zenni said the company’s value has declined more than 30 percent in past years.

Affinity’s board formed the committee of independent directors to review the Z Capital proposal and other strategic alternatives.

Affinity is not publicly traded but has publicly held debt.

Zenni made a similar offer to buy Affinity two years ago. He was appointed to the board last year after a lengthy legal skirmish with the previous board.

Richard Parisi, a senior analyst for Silver Point Capital, is Affinity’s chairman. Silver Point is Affinity’s second-largest shareholder with 25.1 percent.

Affinity Gaming appointed Michael Silberling as CEO last summer. The company experienced a nearly 1 percent increase in the revenue in the first quarter and saw its cash flow jump more than 30 percent.