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Gaming Guru

Ed Vogel
 

Boyd Gaming, Coast Casino Merger Approved

3 June 2004

CARSON CITY, Nevada -- A $1.3 billion merger of Boyd Gaming Corp. and Coast Casinos was quickly approved Wednesday on a 2-0 vote by the Gaming Control Board.

The combined company will consist of 19 gaming properties, have annual revenue of $2 billion and unite the Boyd and Gaughan families, whose lineage in Las Vegas gaming stretches back to the 1940s.

The new Boyd Gaming Corp. will be the fifth-largest gaming company in America. Coast Casinos will be a wholly owned subsidiary of Boyd Gaming and retain its brand name. Coast shareholders will be given $495 million in cash and $325 million in new Boyd shares. Boyd will assume $460 million in Coast debt.

The Nevada Gaming Commission still must approve the merger at its June 17 meeting in Carson City, along with gaming regulators in four other states in which Boyd has properties.

The merger is set to take effect July 1.

"Two gaming giants deeply rooted in the state of Nevada are uniting," Control Board Chairman Dennis Neilander said. "I see it as a win-win situation for all concerned."

Member Scott Scherer echoed Neilander's comments. The third board member, Bobby Siller, missed the meeting because of illness.

In a unique presentation, Boyd Chairman William Boyd and Coast Chairman Michael Gaughan alternated in telling the history of their families in gaming.

They mentioned their fathers, Sam Boyd and Jackie Gaughan, worked together as co-owners of the Union Plaza when it opened in 1971.

"Boyd Gaming has wanted to get back into the locals market, other than Sam's Town, the Eldorado and Joker's Wild, for some time," Boyd said after the hearing. "This is an opportunity to be a major player in the locals market. I have always had a great relationship with Michael Gaughan. This gives us an opportunity not to grow for growth's sake, but to be a better company."

Gaughan said there will be no change when the public looks at the hotel-casinos. Management will be the same and employees will not change.

"I am getting older," he added. "This was a cheaper way of going public."

Coast Casinos operates the Barbary Coast, Gold Coast, Suncoast and The Orleans in Las Vegas. It also plans to open the $400 million South Coast off Interstate 15, about six miles south of Tropicana Avenue, in October 2005.

Boyd joked that when his family opened Sam's Town as the first locals operation in east Las Vegas in 1979, people "thought we had lost our marbles."

The only Strip hotels owned by the companies are Boyd's Stardust and Gaughan's Barbary Coast. They have no Reno or Lake Tahoe hotels, but Boyd has properties in Atlantic City, the Gulf Coast and Midwest.

In response to control board questions, Boyd lawyer Jeff Rodefer maintained the merger will not curb competition among gaming properties in Las Vegas. The company will have 12 casinos and more than 15,000 employees in Clark County.

"At the end of the day, the gaming customer is a discerning individual," said Rodefer, adding that people will shop for the best value.

He said Caesars Entertainment, Mandalay Resort Group, developer Steve Wynn and others will not give up on competing for Las Vegas customers because of Boyd's greater presence.

Company executives also mentioned both companies' large gifts over the years, including many millions to the University of Nevada, Las Vegas, creating the Boyd School of Law and Sam Boyd Stadium, and financing the Boys & Girls Club.

After all financial transactions are concluded, the new company will have a debt of $2.3 billion, or "slightly more debt than equity," Boyd Chief Financial Officer Ellis Landau said.

Boyd Gaming shares fell 2 cents, or 0.09 percent, Wednesday to close at $23.22.