Riviera Shareholders Reject $426 Million Offer

LAS VEGAS, Nevada -- Riviera Holdings Corp.'s shareholders rejected a $426.5 million buyout offer Tuesday, which should keep the company's Strip flagship running as is for the foreseeable future.

"We've been here for 51 years. It looks like we'll be here for a few more," Riviera Holdings Chief Executive Officer and Chairman Bill Westerman said after the votes were tallied at a shareholders meeting in Las Vegas.

Tuesday's action effectively ended Riviera Holdings' quest to sell to a high-profile investment group known as Riv Acquisition Holdings.

The latter group this spring bid $17 per share for the 2,070-room Riviera hotel-casino and its valuable 26-acre north Strip property in addition to a small slot casino in Black Hawk, Colo.

"We're somewhat disappointed, but not surprised," Scott Butera, president of Riv Acquisition, said after Tuesday's vote.

Riviera Holdings' shares have recently traded above $17, thanks to widespread speculation that Riv Acquisition's bid was too low.

The stock closed Tuesday's session at $20.06, up 7 cents, or 0.35 percent, on the American Stock Exchange.

Riv Acquisition's principals include billionaire developer Neil Bluhm; Starwood Capital Group founder Barry Sternlicht; local developer Brett Torino; and partners Paul Kanavos and Robert Sillerman, whose respective holdings include Ritz-Carlton resorts and the branding rights to Elvis Presley and the "American Idol" television program.

Those members remain pleased to own nearly 20 percent of Riviera Holdings shares, Butera said, adding his company has confidence in the hotel-casino operator's management team.

Marc Sole, senior vice president with D.E. Shaw & Co., a New York-based investment firm that owns nearly 10 percent of Riviera Holdings' shares, also expressed faith in Westerman's team.

Beyond that, however, Sole and Butera had little in common regarding Riviera Holdings' future.

D.E. Shaw & Co. was a vocal critic of Riv Acquisition's bid, which Sole said "substantially undervalues" Riviera Holdings' north Strip real estate.

Reached by telephone from New York on Tuesday, Sole said he's happy "that enough shareholders agreed with us."

At least two other large shareholders opposed the Riv Acquisition deal, including Alberta, Canada-based Triple Five Group and Plainfield Asset Management, a hedge fund based in Greenfield, Conn.

Those two companies each own about 9 percent of Riviera Holdings' stock.

A 60 percent majority was required to approve Riv Acquisition's bid.

Westerman did not disclose how the votes were cast beyond saying that the necessary percentage was not obtained.

With no new ownership on the horizon, Riviera Holdings will focus on improving its performance.

"We can't control land values or the multiples people use to value gaming company stocks," Westerman said. "The only way we can affect shareholder value is to have our operations do better."

The Riviera's 51st year hasn't lacked for drama.

Westerman in January sold 1 million of his own shares to Riv Acquisition for $15 per share. But talks to acquire the entire company halted in March when Riviera Holdings' board members could not agree on a price.

But on April 6, management agreed to the $426.5 million sale to Riv Acquisition, which included an assumption of $215 million in Riviera Holdings debt.

Butera at the time said his company did not plan to raze the Riviera. Instead, it would focus on drawing more convention and show patrons as lesser improvements were made.

The following week, D.E. Shaw sent Westerman a letter opposing the Riv Acquisition sale.

Riviera Holdings' longtime chief financial officer, Duane Krohn, and Ron Johnson, who was president of Riviera Black Hawk, left the company in early May.

Westerman on May 2 blasted D.E. Shaw for fueling speculation that an offer better than $17 was looming.

"No credible offers for Riviera have emerged from any other party at any price" since December, he told analysts during a conference call.

In early August, Westerman sold another 1.1 million shares to Riv Acquisition.

A buyout vote was scheduled for Aug. 8., but that was delayed until Tuesday when International Gaming and Entertainment entered the fray Aug. 4 with an unsolicited bid of $20 per share.

That bid was rejected -- for now -- last week when International Gaming and Entertainment failed to provide enough information on its ability to obtain financing, among other concerns.

Because IGE did not withdraw its bid, Westerman said Tuesday that Riv Acquisition is in line to receive a $7.9 million "topping fee" should Riviera Holdings agree to sell to another party within the next 12 months.