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Best of Howard Stutz

Gaming Guru

Howard Stutz

Las Vegas companies linked in $700 million deal

13 March 2007

LAS VEGAS, Nevada -- One of the time share industry's largest acquisitions was unveiled Monday and involves two Southern Nevada companies.

Las Vegas-based Diamond Resorts announced it would purchase Sunterra Corp., which is headquartered in North Las Vegas, in a transaction valued at $700 million. Sunterra operates almost 100 time share resorts in 17 states and 13 countries and employs more than 3,300 people, including 400 in its corporate offices.

Diamond Resorts, which is controlled by Polo Towers developer Steven Cloobeck, will pay $16 a share for all outstanding shares of Sunterra to take the company private. The price per share is 35 percent above Thursday's closing price for Sunterra, which is traded on the Pink Sheets. In addition, Diamond Resorts will assume $375 million in Sunterra's debt.

Cloobeck opened the Polo Towers in 1993 as the Strip's first high-rise time share. He sold his majority ownership in the resort but kept his hand in the time share field. Cloobeck's Diamond Resorts helped design the Marriott Grand Chateau time share near Harmon Avenue and the Strip.

Cloobeck, 45, bought some shares of Sunterra last summer on a friend's advice, but quickly gained an understanding of the company's operations.

"It didn't take me long to come up to speed on Sunterra," Cloobeck said. "I traveled to all the domestic locations and saw a tremendous opportunity. This is a company that was dealing with interim management both here and in Europe. This is going to be my No. 1 interest."

Cloobeck said he was "investing a sizable personal stake" into Sunterra while the deal will be financed by Credit Suisse. The deal must be approved by shareholders in Sunterra, and the companies expect the transaction to close by the end of June.

Cloobeck said it's unclear how the companies will be structured. He will become the company's chairman and chief executive officer, but it is still being evaluated whether Sunterra will become a subsidiary of the much smaller Diamond Resorts. Cloobeck said Sunterra's staffing won't change, but the company's offices would be moved out of North Las Vegas to a new location.

Sunterra, which operates three time shares in Nevada, plans to continue to expand domestically. Las Vegas isn't one of the expansion options, Cloobeck said.

"The (time share) industry is thriving in Las Vegas and, at the present time, there is plenty of inventory," he said.

Cloobeck likened the deal to a gaming industry transaction in the 1990s, when the ownership of the Gold Strike casinos purchased the much larger Circus Circus Enterprises. The company eventually evolved into the Mandalay Resort Group.

The transaction reverberated nationally throughout the time share industry. Analysts said it was the time share industry's largest transaction since the Wyndham hotel chain began consolidating various time share operators in the early 1990s.

"It's good to have Steven Cloobeck and Diamond Resorts back because he understands the industry and can bring a lot of focus and understanding to Sunterra," said Howard Nusbaum, the president of the American Resort Development Association, the industry's largest trade organization.