Riviera Holdings Corp. rejects latest buyout offer

LAS VEGAS, Nevada -- Riviera Holdings Corp. late Wednesday rejected a $336.4 million buyout offer from a high-profile investment group that is the company's largest shareholder.

The rejection marked the second time in 12 months the consortium has lost out on acquiring the 52-year-old Riviera and its prized 26-acre north Strip land parcel.

In a statement, Riviera Holdings said it couldn't accept the offer of $27 a share, made by Riv Acquisition Holdings on Monday, because the group can't seek a deal under Nevada law. Riviera Holdings said the group entered into a lockup and option agreement with two stockholders, Triple Five Investco and Dominion Financial.

Riviera Chairman Bill Westerman said Riv Acquisition needed approval from the company's board of directors before it could take that action.

Riv Acquisition, which includes Starwood founder Barry Sternlicht and Las Vegas developer Brett Torino, controls about 20 percent of Riviera Holdings. Triple Five Investco and Dominion Financial control 9.2 percent.

"As a result of (the) acquisition of a lockup and option without board approval, Riv Acquisition and its related parties are not only disqualified from a merger or other combination with Riviera for three years, but if they buy our shares from Triple Five, Dominion Financial or anyone else without our board's prior approval, their voting rights as to those shares will be reduced to one-one-hundredth of one vote per share, to the extent provided in our articles of incorporation," Westerman said.

"We are deeply disappointed that Riv Acquisition chose to proceed with this lockup and option agreement without board approval," Westerman said.

In addition to the Riviera, the casino operator owns a slot machine casino outside Denver.

The linchpin in any deal is the 2,070-room Riviera and its coveted Strip parcel that has access both off the Strip and Paradise Road. Most analysts believe the site is valuable because it is one of the northern Strip's last available land parcels.

Paul Kavanos, a managing member of New York-based Flag Luxury Properties, in a letter sent Riviera's board of directors Monday and filed with the U.S. Securities and Exchange Commission, said the conditions of the proposed deal were similar to an offer the group made in April last year, when Riv Acquisition offered $17 a share for Riviera Holdings.

The company's shareholders rejected that proposed deal last August.

The cash deal was valued at $336.4 million based on 12.46 million outstanding shares of Riviera Holdings. In addition, the investment group was willing to help Riviera Holdings refinance the company's $210 million in outstanding debt.

In December, D.E. Shaw & Co., a New York asset management firm, participated in a $21 a share offer for Riviera Holdings with developer Bruce Eichner. The deal collapsed when the 30-day negotiating period expired without the parties reaching a purchase agreement.

Riviera shares, on Monday, shot up more than 10 percent on news of the offer. Shares in the company closed Wednesday at $28 on he American Stock Exchange, up 20 cents or 0.72 percent. They have risen more than 70 percent in the last year.