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LAS VEGAS -- Riviera Holdings executives lobbied shareholders to vote in favor of the company's proposed $426.5 million buyout Friday, using its quarterly conference call to dismiss any rumors about additional offers for the parent of the Riviera.
With two major shareholders publicly saying they will vote against the buyout by a private investment group because they believe the agreed-upon price of $17 a share was too low, Riviera Holdings Chairman Bill Westerman implored shareholders to vote in favor of the transaction when they meet Aug. 8.
"Not voting on the merger will have the same effect as voting against it because a favorable vote of holders of at least 60 percent of our outstanding shares is required for approval of the merger," Westerman said in remarks on the conference call.
One gaming analyst estimated that at least 30 percent of Riviera's outstanding shares are already opposed to the merger, including more than 1.2 million shares controlled by D.E. Shaw Group and more than 1 million shares owned by Triple Five Investco, a subsidiary of Canadian mall developer Triple Five Group.
Other large shareholders, the source said, such as Plainfield Asset Management, may follow those leads.
Westerman was asked pointed questions during the conference call by gaming analysts Steve Ruggiero of CRT Capital Group and Adam Steinberg of Morgan Joseph if the company's board of directors had any contingency plans in place should the buyout be rejected by shareholders.
"That's something I can't answer," Westerman said. "I'd like to be more specific, but we believe the merger will be approved."
Steinberg told Westerman he thought it was a distinct possibility the buyout would be rejected.
In April, Riviera Holdings agreed to sell its 51-year-old Strip resort and Colorado casino to Riv Acquisition Holdings, which includes Starwoods Hotel chain founder Barry Sternlicht, Las Vegas developer Brett Torino and Chicago developer Neil Bluhm.
In a proxy filing to the Securities and Exchange Commission that was sent to shareholders, Riviera Holdings said the Sternlicht group first proposed $23 a share for Riviera, and then came back with an offer of $15 a share, which was rejected. The parties then settled on $17 a share.
Riv Acquisition has said it would continue to operate the 2,070-room Riviera, one of the Strip's oldest casinos, as is.
Meanwhile, Riviera shares climbed in value. On Friday, the stock price closed at $20.40 in trading on the American Stock Exchange, up 35 cents, or 1.75 percent.
Westerman said the company has not received any credible offers that would top the $17 a share price since the deal was agreed upon.
At the outset of the conference call, Westerman told shareholders that more than 100 potential purchasers were solicited when the board first put the property up for sale in February 2005.
In addition, any company wanting to buy the Riviera in order to demolish the hotel-casino for its 26-acre parcel, would face additional costs, including demolition, debris removal, termination of employees and cancellation of leases and other contracts.
"Consequently, we believe that any per-acre pricing analysis must take into account the significant costs required to turn our Las Vegas property into vacant, developable land," Westerman said. "I want to stress that after considering all the relevant factors, Riviera's board of directors concluded that $17 per share was the best price we could obtain for the company and continues to be the best price we can obtain for the company."
The company's earnings took second fiddle to the buyout discussion.
For the second quarter that ended June 30, revenue for Riviera Holdings was $52.4 million, down 1.5 percent from $53.3 million for the second quarter of 2005.
However, income from the company's two casinos was $6.9 million, an increase of 23 percent from $5.6 million a year ago.
Earnings per share was 3 cents, a vast improvement from a loss of 8 cents a share the year before. Analysts polled by Thomson First Call thought the company would earn 10 cents a share.
The Riviera in Las Vegas had revenue of $39.7 million in the quarter, down 2 percent compared with $40.5 million a year ago. Cash flow at the property, described as earnings before interest, taxes, depreciation and amortization, was $8.4 million, up almost 10 percent compare with $7.6 million last year.
Riviera Las Vegas President Robert Vannucci said an increase in slot revenue and the average daily room rates helped to drive earnings at the Strip property. The company also marketed toward customers of the recently closed Westward Ho casino.
The company's casino in Black Hawk, Colo., outside of Denver reported revenue of $12.8 million, slightly above $12.7 million from a year ago. The company said increased competition from the recently remodeled Ameristar Black Hawk casino affected the bottom line.
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