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Howard Stutz
 

Casino operator Full House Resorts for sale

23 October 2014

Regional casino operator Full House Resorts officially put itself up for sale Wednesday, but the head of an investment group said it would continue seeking a special stockholders meeting to remake the company’s board.

In a statement, Las Vegas-based Full House said management was directed to begin a sales process following talks with various advisers.

The decision comes almost two weeks after five investors — led by gaming executive Dan Lee — initiated a proxy fight asking the company to hold a special board meeting to vote on expanding the board.

“After its evaluation of strategic alternatives, the board of directors has determined that pursuing a sale of the company is the best course of action to maximize stockholder value and is accordingly in the best interest of all stockholders,” the statement read.

Full House owns three casinos: one in Indiana, one in Mississippi and the Stockman’s Casino in Fallon. The company also manages the Grand Lodge Casino at Hyatt Lake Tahoe under a lease agreement.

Lee’s group holds 6.2 percent of Full House shares, which are traded on the Nasdaq. This week, a trust set up by the company’s late CEO that owns 9.4 percent of Full House sided with the shareholder group.

In the statement, Full House said the company “welcomes the dissident stockholder group to participate in the sale process.”

A spokesman for Full House said the company would not comment beyond the statement.

Lee, the former CEO of Pinnacle Entertainment and chief financial officer of Steve Wynn’s Mirage Resorts, said the shareholder meeting should continue despite the company’s decision to put itself up for sale.

“There is no guarantee the company will be sold,” Lee said. “Even if the company is sold, the sale still requires shareholder approval.”

Lee’s group, which includes former Boyd Gaming Corp. CFO Ellis Landau, wants to hold an election to expand Full House’s board from five members to 10 directors.

The shareholders has asked the U.S. Securities and Exchange Commission for permission to approach shareholders with the plan. Lee’s group needs 40 percent support from shareholders to call the meeting.

In its statement, Full House said Lee’s group was conducting a “disruptive and expensive process to call a special meeting.”

Lee countered that Full House is spending shareholder money by paying outside advisers, such as Macquarie Capital and the Latham & Watkins LLP as it pursues the sale process. He called the sales effort “a smoke screen.”

Lee’s group has criticized the company’s management and cited a 59 percent drop in the company’s stock price. It also said executives are overcompensated and highlighted the failed acquisition of a casino in Tunica, Miss.

Full House, Lee said, had zero debt two years ago and now in default on its debt covenants for a portion of the company’s $65 million in debt.

The shareholder group suggested Full House doesn’t have the money to finish construction of a hotel at the Mississippi casino.

“We haven’t asked for control of the company,” Lee said. “It’s kind of disingenuous to blame us for an expensive process.”

Full House is part of two casino proposals in upstate New York. In a separate statement, the company said a sales process “does not impact day-to day operations and the company remains committed to exploring further growth opportunities in New York.”

Trading in the company’s stock was halted Wednesday morning but resumed later in the day. The company’s shares closed at $1.34, up 7 cents or 5.51 percent.