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Best of Howard Stutz

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Howard Stutz
 

Investment firm makes offer for Laughlin casino operator Archon Corp.

16 April 2013

A Boston-based investment management company has proposed a $101.5 million buyout of Laughlin casino operator Archon Corporation.

Esplanade Capital, which says it is the second-largest outside shareholder in Archon, proposed the buyout offer last month to Archon’s board of directors.

The company offered $17.50 per share in a negotiated transaction for all 5.8 million shares of Archon, which owns the Pioneer Hotel & Gambling Hall in Laughlin; a 27-acre site on the north end of the Strip on which the Wet ’n’ Wild water amusement park once stood; and office buildings in Maryland and suburban Boston.

However, Archon Chairman Paul Lowden, whose family owns more than 85 percent of the company, said Monday that he has “no intentions” of selling the business. He said the buyout proposal “wasn’t really a serious” offer.

Esplanade Capital President Shawn Kravetz said Monday that the board of Archon had not responded to his offer, which is why he made the offer public Monday.

Lowden is a longtime gaming figure who once owned the Sahara and Hacienda hotel-casinos. His wife, former Republican state Sen. Sue Lowden, is an official in the corporation.

Archon was created in the past decade after Paul Lowden’s former company sold the Sahara and the Santa Fe in northwest Las Vegas in separate transactions.

The 400-room, Western-themed Pioneer is one of Laughlin’s older casinos.

Kravetz said Esplanade’s offer for Archon represented a nearly 62 percent premium to the company’s average closing price over the 90 days before the offer’s submission.

On Monday, shares of Archon, which are traded on Over-the-Counter Bulletin Board, closed at $13 a share, up $2.50, or 23.81 percent.

Kravetz said he has not been able to reach Paul Lowden or Sue Lowden. He said the buyout offer is an attempt “to give shareholders a voice.”

In a letter to Sue Lowden, who is Archon’s secretary, Kravetz said Archon shareholders “deserve” to learn about the offer.

“We ask that the board immediately commence negotiations with us or publicly commit to a sales process,” Kravetz wrote.

Esplanade has owned shares of Archon since 2006. Kravetz said Archon is undervalued and has underperformed.

Paul Lowden said Esplanade made a similar offer in 2008. He said it was unclear toward whom the recent offer was directed.

Lowden said the board can’t do anything with the proposal because the shares can be purchased only through the open market.

“It’s just kind of a way to harass you,” Lowden said.

Kravetz accused Lowden of ignoring shareholders while the company “employed a reverse- and forward-stock split to eradicate small shareholders” in 2011.

Kravetz accused Archon of misstating its March 2012 financial statements.