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Carl Icahn, Feared Corporate Raider, Now a Serious Player in the Casino Industry

With an eagle's eye trained on exploiting troubled companies for his own gain or, ostensibly, increasing shareholder value, the quintessential corporate raider has over the years made predatory investments in high-profile firms including TWA, Marvel Entertainment, Pan Am, RJR Nabisco, Texaco, U.S. Steel, Phillips Petroleum and Hammermill Paper.

Sometimes Icahn invests for control of the company, sometimes for a quick profit. Sometimes he gains his advantage by buying the ailing bonds and then dictating terms when the company tries to restructure, sometimes he gains his advantage by buying a major block of stock and forcing a company's board to deal with his demands.

All of the time he's a force with whom to be reckoned, as the directors of RJR Nabisco are finding out: Icahn is essentially now forcing a sale of the company.

It with this modus operandi that the reclusive billionaire is fast becoming a player in the casino industry.

He owns the towering Stratosphere on the Las Vegas Strip as well as Arizona Charlie's, a successful off-Strip locals casino in Las Vegas. He gained control of both casinos in 1998.

On May 23, he's scheduled to open Arizona Charlie's East on Las Vegas' Boulder Highway.

In Atlantic City, Icahn is about to gain control of the Claridge and he's gained the upper hand in his bitter duel with casino titan Park Place Entertainment Corp. for control of the Sands.

"He's an interesting guy. I think he's got a war chest that could make a difference in terms of funds," said Anthony Curtis, publisher of the Las Vegas Advisor, a monthly newsletter for gamblers.

"Icahn is mentioned with the other guys who are on the fringes -- Marvin Davis, Ron Perelman, Phil Ruffin, Richard Rainwater, all mentioned as guys who are potential players in Las Vegas. Icahn is really the first one to punch through and have a significant ownership," Curtis said.

Icahn has deftly used the bond markets and bankruptcy courts to build his burgeoning casino operation. When the casinos' results were hurting and their bonds were cheap, Icahn bought a chunk of their debt. He made sure to get at least a third of the bonds, enabling him to block any competing restructuring or takeover plan if it went into bankruptcy.

Icahn would then seek to convert his debt into equity as the negotiations or bankruptcy fights moved forward. He took that route with four of the casinos that he either owns or seeks to own.

In the case of Arizona Charlie's East, he simply bought that property, formerly the non-casino Sunrise Suites, at a January bankruptcy auction for $43.3 million.

"Heretofore in this industry he has existed below people's radar screens. I suspect he's out to change that," said Jacques Cornet, who analyzes gaming bonds for CIBC World Markets, a major investment bank. "He likes the industry and has always liked the industry. I think what he's been doing is waiting for a time when the assets were cheap.

"In casinos now, like in many industries, the assets are cheap. He views it as a cheap sector."

Indeed, Icahn said he's not necessarily trying to become a casino tycoon. Of his bid for the Sands, Icahn told The Press of Atlantic City last month: "I enjoy making good investments and I think this is a good investment."

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