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Arnold M. Knightly

Fight over Riviera Holdings moves to meeting, court

30 April 2007

LAS VEGAS, Nevada -- An investment group in a contentious takeover attempt of the Riviera's parent company is taking its fight directly to shareholders and the courthouse following the company board's denial of a $336.4 million buyout offer in March.

Riv Acquisition Holdings announced Friday its nominees for Riviera Holdings Corp.'s board elections to be held during the shareholders meeting scheduled for May 15. Riv Acquisition Holdings controls about 20 percent of the stock.

"Riviera's board ... has demonstrated a lack of objectivity in the way it has addressed our offer for the company," Paul Kanavos, managing member of Flag Luxury Properties and a leader of Riv Acquisitions said in a statement.

Riveria Holdings officials declined comment.

Riv Acquisition also filed a lawsuit in District Court on April 17 challenging the board's interpretation of a state business law cited as the basis for denial of allowing a vote.

The investment group on March 28 asked the board to step aside and let the shareholders vote on the $27 per share buyout offer.

Board Chairman and Chief Executive Officer Bill Westerman denied the request for a vote, charging the investment group had illegally entered lockup and option agreement to buy 9.2 percent of the company's shares from two major stockholders without board approval which is required under the state's business laws and the corporation's bylaws.

The announcement follows the April 16 renomination of all current board members by Westerman.

Mike Sullivan, a finance professor at the University of Nevada, Las Vegas, said that boardroom takeover attempts such as this one happen sporadically and rarely succeed.

"In some ways, this is a public fight for the company," Sullivan said. "Each position is posturing pre-meeting to win their side."

The proxy fight is the latest salvo in a battle for control of the gaming company.

An initial $17 per share offer for the company made in September was deemed too low by shareholders.

A follow-up offer of $27 per share made on March 26 but was blocked by the current board on grounds that Riv Acquisition colluded with two major shareholders of the company for the additional 9.2 percent of shares.

The offer requires the approval of holders of 60 percent of the stock.

Riviera Holdings also let a 30-day negotiating period expire on a $21 per share offer made in December by New York-based asset management firm D.E. Shaw and Cosmopolitan developer Bruce Eichner.

"This could be the first step of applying public pressure to have the Riviera start listening to takeover offers," Sullivan said. "(Riv Acquisition) has a good chance of winning the public relations battle with investors."

Riviera Holdings shares rose 19 cents, or 0.65 percent, Friday to close at $29.43 on the New York Stock Exchange.

The shares have risen more than 70 percent in the past year.