Ruling boosts Riviera suitor

LAS VEGAS, Nevada -- Investors trying to wrest control of a Strip casino got an assist from a Nevada court, but their attempted hostile takeover of the parent of the Riviera may face other obstacles because of turbulence in global financial markets.

Late last week a Clark County District Court judge struck down a moratorium that would have barred for three years a maneuver by Riv Acquisition Holdings to consolidate shareholder support for a takeover of Riviera Holdings Co., the firm that owns one of the last Strip resorts with a connection to Las Vegas' heyday of mob rule, the Rat Pack and Liberace performances.

The decision goes against an attempt by Riviera management to block a takeover by requiring Riv Acquisitions to get board approval before locking up options on shares from two major stockholders.

But in the months it took for the court to make the decision, the weakening of mortgage lending structures and subsequent fiscal fallout has dried up many potential money sources to finance the types of takeovers and buyouts that have been common on the Strip recently.

In short, the market may have accomplished what Riviera management could not.

"Three months ago nobody could have guessed this," said Michael Sullivan, a professor of finance at the University of Nevada, Las Vegas. "It is kind of known in the marketplace that takeovers are on hold right now. You just can't get the money."

The fate of the Riviera, along with an affiliated casino in Colorado, has been in question since September, when would-be buyers offered $17 per share for the company, an offer worth about $212 million. Shareholders rejected the offer.

The Riv Acquisitions group raised the offer in March to $27 per share, about $336 million, but management accused the group of colluding with shareholders in violation of Nevada law and blocked the bid, which prompted the court proceedings.

The buyout offer is now up to $424 million and Riviera management has reported it will "promptly contact" Riv Acquisitions about a possible deal, according to Bloomberg News.

But at the same time the company has taken steps that could make a takeover more difficult.

In a filing Friday, it amended company bylaws to limit the power to call special shareholder meetings to the chairman and president of the board of directors. Changes also require specific approval from the board for stockholders who want to attend teleconferenced meetings.

Representatives from both Riviera Holdings and Riv Acquisitions declined to elaborate Monday on the implications of the recent court decision. They are awaiting a written statement from the court that will explain the ruling in detail.

Sullivan said that despite the court's decision to lift management's blockade on the takeover attempt, the type of money that funded the $17.1 billion private equity offer for Harrah's Entertainment and Elad Group's $1.2 billion purchase of the New Frontier is not as easy to come by as it was earlier in the year.

That could complicate the attempt to take over the Riviera. "Now it is more difficult to raise the money at a reasonable rate," he said. "The takeover group may not be as interested in buying them out."

For customers that means the status quo still reigns at the Riviera.

Company officials recently announced a 30-month plan to invest $25 million to refurbish its 2,075 hotel rooms and upgrade the casino in Las Vegas and renovate the Colorado property to meet requirements of a smoking ban.

Those improvements still leave the Riviera trailing upper echelon Strip casinos when it comes to size and luxury.

"It is not a good financial situation. But it is sort of a living museum to Vegas of yesterday," said Nick Christenson, operator of the blog Casino Death Watch.

The Riviera opened in 1955 with Liberace headlining in the showroom and an architectural style that was a departure from other Strip properties of the time that resembled motels.

In 1967, Rat Pack member Dean Martin became a minority owner of the property. The Riviera later appeared in the 1995 movie "Casino" as well as the 1997 hit "Austin Powers: International Man of Mystery."