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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Affinity Gaming's largest shareholder seeks to take control of company

24 October 2012

LAS VEGAS -- The largest shareholder in Affinity Gaming is seeking regulatory approval to take control of the Las Vegas-based casino operator.

In addition, the chief executive officer of Z Capital Partners, an Illinois-based private equity group, said a $300,000 payment authorized by Affinity's board of directors to its chairman in 2011 created "an obvious, material and inappropriate risk of a conflict of interest, is an extremely poor corporate governance practice and should never have been considered, nor be permitted in the future."

In a petition filed with the Missouri Gaming Commission last week, Z Capital CEO Jim Zenni said the company was seeking a "change in control" under the state's gaming regulations.

Z Capital, which owns 24.97 percent of Affinity Gaming, expects to increase its ownership stake in the company above 25 percent, which would trigger change-of-control clauses under various rules .

Affinity currently operates 12 casinos: nine in Nevada, two in Missouri and one in Iowa. In Southern Nevada, Affinity operates the three Primm resorts and the off-Strip Terrible's. Affinity was approved by Colorado gaming regulators on Friday to take over operations at three casinos in Black Hawk that were acquired in an asset swap with Golden Gaming.

Affinity was from the remnants of the bankrupt Herbst Gaming in December 2010. The current five-member board was formed after the bankruptcy and owns a combined 2 percent of the company's outstanding shares, according to a letter Zenni sent to the board on Friday.

He criticized a $300,000 payment the board authorized to Chairman David Kornstein, who helped negotiate a three-way asset swap and sale between Affinity, Golden Gaming and JETT Gaming, in which Affinity disposed of its slot machine route operations and acquired the Colorado casinos.

In its proxy statement, the company said it did not use an outside adviser.

Affinity Gaming representatives could not be reached for comment.

Zenni told Missouri gaming regulators the company seeks "representation" on Affinity's board of directors and Z Capital would probably increase its ownership stake in the company.

In his letter, Zenni said Z Capital has been approved by gaming regulators in Missouri, Iowa and Colorado and has an application pending with the Nevada Gaming Control Board.

Zenni called Affinity's current management team "outstanding" and the company's intention "is to maintain, rather than change" current management.

"We firmly believe that the company has a very promising future as a standalone gaming operation that should remain an independent, publicly traded entity for the foreseeable future," Zenni said.