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Howard Stutz

Riviera Holding's sale still in limbo

14 December 2006

LAS VEGAS, Nevada – For the second time this year, a deal to purchase the parent company of the Riviera has fallen apart.

Riviera Holdings Corp. announced that a 30-day exclusive negotiating period with developer Bruce Eichner and New York-based asset management firm D.E. Shaw and Co. expired Wednesday without the parties signing a purchase agreement.

D.E. Shaw and Eichner, who is building the $1.8 billion Cosmopolitan hotel, casino and condominium project next to the Bellagio, offered to buy Riviera Holdings for $21 a share on Nov. 13. The deal, valued at more than $470 million, included $262.5 million for the company's 12.5 million outstanding shares and assumption of an estimated $210 million in debt.

In a brief statement, Riviera Holdings said an agreement to let Eichner and D.E. Shaw bid together for the company had also expired.

"We remain committed to the growth and ongoing success of our company and will continue to focus on maximizing our company's performance," Riviera Chief Executive Officer Bill Westerman said.

The bid by Eichner and Shaw came almost three months after Riviera shareholders turned down a bid of $17 a share bid from a group known as Riv Acquisition Holdings. D.E. Shaw, which controls 1.2 million shares of Riviera, was one of the more vocal opponents of that deal.

Eichner, who owns 600,000 shares of Riviera, has developed commercial, residential and hospitality projects in the Northeast and Florida.

When the Eichner bid was announced, several Riviera shareholders said they thought the $21 a share bid was too low, believing the company could fetch a higher price per share based on the value of a 26-acre Strip land parcel that houses the 2,070-room Riviera.

In addition to the endorsement of the company's board of directors, Eichner and D.E. Shaw would have needed approval of 60 percent of Riviera's shareholders to acquire the company. Eichner said the unwillingness of some shareholders to support the offer led to the deal's collapse.

"Several of the shareholders I spoke with are not buyers and they are not sellers," Eichner said. "It was difficult to ascertain what they were interested in. I felt there were a couple of key shareholders, that if you secured their support, you had a much higher likelihood of being successful."

Eichner said he would hold onto his shares in Riviera and might look at another attempt, possibly as soon as next year.

Shares in Riviera, traded on the American Stock Exchange, closed at $22.69 Wednesday, down 62 cents, or 2.7 percent.

In addition to the Strip casino, Riviera Holdings includes a slot machine casino in Black Hawk, Colo., outside of Denver.

Riv Acquisition purchased the shares owned by Westerman last year in a run-up to its buyout offer. Riv Acquisition owns nearly 20 percent of Riviera Holdings' outstanding shares.

Riv Acquisition's principals include billionaire developer Neil Bluhm; Starwood Capital Group founder Barry Sternlicht; Las Vegas 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.

Riv Acquisition President Scott Butera said his group hasn't taken any role in management of the company but is still interested in owning Riviera Holdings.

"Right now, we're just going to wait and see how things unfold," Butera said. "We believe in the company and we believe in the management and we're happy with our investment position."