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The Deal to Sell Donald Trump's Casino Company Hits Several Snags;
Analysts Put its Value at $11 a Share; Trump Seeks $22
By Suzette Parmley, The Philadelphia InquirerMcClatchy-Tribune Regional News

Jun. 27, 2007 - --The deal to sell Donald Trump's casino company has hit several snags, including price, according to people involved in the negotiations.

While the stock is now trading at less than $14 a share, an independent Wall Street firm says the company should fetch about $11 a share.

"What they want, and what the other side is willing to pay for, are so far apart," said one of those people, who is close to the bidders. "It's not looking too good."

Several people involved in both sides of the negotiations to sell Trump Entertainment Resorts Inc. to a private-equity partnership headed by Dennis Gomes and Morris Bailey agreed to discuss the talks only if they were not identified.

An announcement last week by the New Jersey Casino Control Commission, which regulates the Atlantic City gambling market, did not help Trump, according to the person close to the Gomes-Bailey partnership.

Last Wednesday, the commission ruled that as a condition of the Trump casinos' getting their five-year licenses renewed, each had to submit a monthly earnings report, instead of a quarterly report, as do the city's other casino operators. The commission said the company's revenue projections for the year were overly optimistic when compared with what they had been generating this year and had underestimated the impact of slots competition from Pennsylvania and New York and new smoking restrictions in Atlantic City's casinos.

The requirement "displays, from the division's point of view, a complete lack of confidence in the organization to meet its financial goal," said a person close to the Trump organization, who also is familiar with the talks.

"This is not a slam-dunk deal by any means," said high-yield-bond analyst Barbara Cappaert, who has followed Trump for more than a decade.

Cappaert, of KDP Investment Advisors Inc., of Montpelier, Vt., said that if Trump got no deal, it would put the company in an even more precarious situation. Trump and his board of directors fired chief executive officer James Perry earlier this month for reportedly opposing a sale to Gomes and Bailey. On June 18, Perry announced he was resigning, effective July 1.

"If they do not, in fact, sell the company, who's in charge?" Cappaert said. "What's the plan? Are they going to come in with another major CEO? It puts the company in a lot of flux.

"It places an additional layer of pressure on Trump himself and the shareholders to not let this deal get away," she said.

Negotiations continued yesterday with little movement on price.

Trump has asked for more than $2.2 billion for the Trump Taj Mahal, Trump Marina and Trump Plaza casinos in Atlantic City, which includes $1.5 billion in debt. That price tag values the company at more than $22 per share.

"They are way off in terms of stock price," said a person who has participated in the negotiations. "I can't see them going down and the other side going up. That's really the summary of it."

In a June 5 analysis, the Bear Stearns Cos. Inc. said the company had a "fair-value target of $11" per share. Other Wall Street firms have said the company's shares could rise to as much as $17 under ideal conditions. The shares closed yesterday at $13.87 on the Nasdaq, down 27 cents.

Morris and Gomes have offered more than $11 per share, but Morgan Stanley, which is leading the sales talks on behalf of Trump as the largest group shareholder, wants more than $17 a share, according to a person close to the Trump side of the negotiations.

Morgan Stanley began pumping $500 million into the Trump casinos in spring 2005 for renovations as part of a bankruptcy restructuring and will have to sign off on any deal. The Wall Street firm is also building its own $2 billion gambling palace on the Boardwalk.

Contact staff writer Suzette Parmley at 215-854-2594 or sparmley@phillynews.com.

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To see more of The Philadelphia Inquirer, or to subscribe to the newspaper, go to http://www.philly.com.

Copyright (c) 2007, The Philadelphia Inquirer

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