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Howard Stutz

Group dislikes Station buyout bid

26 January 2007

LAS VEGAS -- A Washington, D.C.-based investment group affiliated with organized labor said Thursday it believes the management-led proposed buyout of Station Casinos undervalues the company and should be rejected by its board of directors.

CtW Investment Group, which is affiliated with a federation of labor unions representing 6 million members that broke away from the AFL-CIO in 2005, thought an offer of $82 a share by Fertitta Colony Partners doesn't reflect Station Casinos' vast real estate holdings in Las Vegas and the potential value of future casino earnings and tribal gaming management contracts.

Fertitta Colony Partners includes members of the Fertitta family, including Station Casinos Chairman Frank Fertitta III and company President Lorenzo Fertitta, who took the casino operator public in 1993.

CtW Investment Group, which works with union-sponsored pension funds and public employee pension funds with combined control of more than 2.6 million shares of Station Casinos, believes the company is worth more than $97 a share.

"In our view, the proposed $82 offer by Fertitta Colony Partners would allow the insiders of the company to unfairly capture the value of (the company's) investments at the expense of long-term shareholders," William Patterson, executive director of CtW, said in a letter to the nonmanagement members of the Station Casino board of directors.

The investment group also called for Dr. James Nave, chairman of the board's special committee evaluating the buyout offer, to step down from the committee because he reportedly helped facilitate an acquisition by the Fertitta family's investment arm in his role as the outside director of a bank.

"It is crucial that the special committee evaluating this transaction act solely in the interests of the company's shareholders, and we therefore call for Mr. Nave to step down from the committee," said Richard Clayton, CtW's director of growth strategies.

Station Casinos spokeswoman Lori Nelson said the company would not comment on anything related to the proposed buyout. Nave was unavailable for comment.

The move against the buyout comes almost six weeks after the Fertitta family and Los Angeles-based Colony Capital offered to take the Las Vegas-based casino operator private in a $4.7 billion transaction.

"We pay particular interest to these corporate transactions and we will share our findings with the funds we represent," Clayton said. "We viewed this proposal as a low price and once we began looking at the company, we think the company was significantly undervalued."

Clayton said the per-share value placed on Station Casinos' stock was based on a "reasonable" multiple of the company's projected 2008 cash flow, a third-party valuation of Station Casinos land holdings and an independent analyst estimate that values the company's future tribal gaming contracts. In addition, Station Casinos' 50 percent joint-venture holdings with the Greenspun Corp. in the Green Valley Ranch Resort and the planned Aliante Station were factored.

Clayton said that CtW shared its findings with Culinary Local 226, which has had a long-standing feud with Station Casinos over organizing the company's work force. However, he said the Culinary union was not involved with the investment group's letter.

Culinary Union representative Chris Bonher said union leaders had seen CtW's letter but would not comment on its contents.

"It's their initiative," he said.

Group dislikes Station buyout bid is republished from