Station's Out ... For Now

Executives with both Station Casinos Inc. and Kerzner Interactive said today that Station's decision to convert its stake in Kerzner to an option to buy does not indicate flagging interest in Internet gaming on the part of Station.

Scott Nielson, chief legal officer for Station, said his company's move to convert its 50 percent interest in Kerzner into the option to buy a stake in Kerzner at a later date was based on the nebulous state of legality concerning Nevada gaming corporations that get involved in the Internet gambling industry.

"We're still very interested in Internet gaming and believe there's some great possibilities in Internet gaming, and we also are very impressed with Kerzner Interactive and what they're doing..."

-Scott Nielson
Station Casinos

"We're still very interested in Internet gaming and believe there's some great possibilities in Internet gaming, and we also are very impressed with Kerzner Interactive and what they're doing," Nielson said. "But earlier this year, in the late spring and early summer, the Nevada Control Board and Gaming Commission held some hearings in which whey talked about Internet gaming, where they were not clear in terms of the standards that they are going to apply to Nevada licensees who participate in Internet gaming.

"As a result of that lack of clarity, we just felt it was better to be in a situation of delaying our closing and being able to make a decision later about acquiring that interest," he said.

In February, Station and SunOnline, which operates gambling site Casino Atlantis, which is based on its resort in the Bahamas, announced their union on the Internet gambling marketplace. SunOnline, now Kerzner Interactive, was a subsidiary of Sun International Hotels Ltd., which is now Kerzner International Ltd.

Casino Atlantis operates under an Isle of Man online gaming license and was launched in early 2002.

Tobin Prior, CEO of Kerzner Interactive, echoed Nielson's statement that the decision reflects Station's commitment to enter the online gambling market rather than a delay.

"They've made a statement that they are committed to the deal and so are we, but obviously we wanted to find a way of moving this deal forward while at the same time appeasing all the regulators that we need to appease," he said.

Prior said the new deal gives Station more flexibility to decide exactly when it wants the sale to take place.

"All they've done is paid a certain amount of money, $4.5 million now, for that option, which if anything, in my books, indicates a commitment and not the other way around," he said.

Nielson said unpinning the sales date would enable Station to comply with Nevada regulators, when and if they decide on rules governing Nevada corporations' entrance into the online gambling business.

"It really gives us the ability to make a decision about the correct timing of when to close that transaction," he said.

Nielson said Station does not know when that time will be, but that the company hopes it comes relatively soon. In fact, should the authorities make a final decision in the coming weeks, which is not expected, Nielson said Station would move immediately to close the deal with Kerzner.

MGM Mirage is another land-based gaming company that is entering the online gambling industry--in September of last year; it acquired an Internet gambling license in the Isle of Man. Nielson acknowledged that Station is taking a different approach than MGM is.

"I think maybe we're being a little bit more cautious than they are," he said.