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Howard Stutz
 

Tropicana staying put

2 November 2006

LAS VEGAS, Nevada – On the same day one aging Strip icon was closed, another older casino received a reprieve.

Columbia Sussex Corp. President Bill Yung III told Nevada gaming regulators Wednesday the Tropicana wouldn't be shut down once his company's $2.75 billion buyout of Aztar Corp. is completed.

Instead, the resort and its 34-acre site would be the recipient of an estimated $2 billion remodeling project that will give it more than 8,000 hotel rooms and an additional hotel brand.

"We're hoping to have the site plans approved by the end of the year and maybe start the initial construction in July," Yung said following a half-hour hearing where the Gaming Control Board gave Columbia Sussex tentative approval to buy Phoenix-based Aztar. The Nevada Gaming Commission will render its decision on the takeover Nov. 16.

Yung and other Columbia Sussex officials were planning to board a plane immediately following the control board hearing and fly to Atlantic City, where New Jersey gaming regulators were planning for a hearing on the transaction.

Both Columbia Sussex and Aztar officials said they hope the deal will close by year's end.

Once the deal closes, Columbia Sussex will operate 12 casinos in Nevada, Louisiana, Mississippi, Illinois, Indiana and New Jersey. The company's New Orleans riverboat was destroyed a year ago by Hurricane Katrina and is being moved to a neighboring city.

In Nevada, Columbia Sussex operates The Westin in Las Vegas, River Palms in Laughlin and two casinos in South Lake Tahoe, Horizon and MontBleu. Columbia Sussex also operates about 82 nongaming hotels under different brands.

Nevada gaming regulators had few questions or concerns about the buyout.

"We're comfortable that through cash flow, you will be able to pay off your debt and fund any capital expenditures," Control Board Chairman Dennis Neilander said.

Columbia Sussex is also getting the Ramada Express in Laughlin, the Tropicana Atlantic City and a small casino in Indiana as part of the transaction. Yung said a renovation of the Tropicana Las Vegas site could be ongoing through 2009.

Both Tropicana hotel towers would remain, Yung said, but the rooms would be renovated. A proposed rendering showed five additional hotel towers being constructed on the site that is bordered by Tropicana Avenue and the Strip.

One of the new hotel towers, Yung said, would be dedicated to a yet-to-be determined hotel brand.

Yung said the Tropicana will remain a place for middle-market gaming consumers, including customers displaced by Wednesday's closing of the Stardust. He believes the price-points for the Tropicana, however, will climb as new portions of the property are added.

The Tropicana's casino will remain open during the construction, but eventually closed to make way for a newer gaming area. New public areas, such as restaurants and entertainment venues, would also be added. Yung told gaming regulators 600,000 square feet of convention space would be part of the new design.

Yung said various corporate functions, such as payroll and casino purchasing will be handled out of the company's headquarters in Ft. Mitchell, Ky.

"I think we'll see some cost savings through those functions," Yung said.

He said Columbia Sussex plans to retain employees of the Tropicana throughout the renovation, but said staffing levels have decreased since the Aztar buyout was announced in May.

Columbia Sussex is paying $54 a share for Aztar in an all-cash deal, as well as an assumption of the company's $676 million in debt and conversion of the company's bonds.

The purchase agreement calls for the transaction to close by Nov. 19, or else the price per share will increase less than a penny per share a day. The price goes up by just less than 2 cents per share a day if the deal isn't closed by Feb. 19.