|By Donald Wittkowski, The Press of
Atlantic City, Pleasantville, N.J.McClatchy-Tribune Regional News
Jan. 16, 2013--The parent company of online gambling giants PokerStars and Full Tilt Poker has agreed to buy the Atlantic Club Casino Hotel in a deal that would help revive one of Atlantic City's weakest casinos.
Rational Group, based on the Isle of Man in the British Isles, has filed papers with the New Jersey Division of Gaming Enforcement seeking regulatory approval to buy the Atlantic Club from Resorts International Holdings.
"The acquisition of the Atlantic Club Casino Hotel will secure up to 2,000 jobs and maintain the economic benefits the casino brings to New Jersey," Michael Frawley, the casino's chief operating officer, and the Rational Group said in a joint statement Tuesday.
During the interim, the Atlantic Club will operate under current management, which will be retained after the acquisition is complete, the statement said.
Rational Group spokesman Eric Hollreiser said the company would have no immediate comment beyond the statement. He declined to disclose terms of the deal, including the purchase price.
Atlantic Club, which has been losing millions of dollars, would receive new funding from the Rational Group's U.S. subsidiary "to maintain the required financial stability" under New Jersey's casino laws, the company said.
"Rational US is a willing and enthusiastic prospective purchaser, and it intends to improve the financial viability of the property, and, therefore, the offerings available in Atlantic City," the company noted in its papers.
Atlantic Club has struggled under its current ownership. It suffered a $13.6 million gross operating loss through the first nine months of 2012. Fourth-quarter results for 2012 will not be released until later this year.
Atlantic Club's gambling revenue fell 11 percent in 2012 to $127.2 million. Atlantic Club was 10th among Atlantic City's 12 casino hotels in total annual revenue from slot machines and table games.
As Atlantic Club's new owner, the Rational Group would gain a foothold in the Atlantic City market at the same time New Jersey has proposed legalizing Internet gambling. On Dec. 20, the Legislature approved a bill to allow online gambling in the state, but the measure is awaiting Gov. Chris Christie's to sign it into law. The governor, who has not yet said whether he supports the measure, has until early February to sign or veto it.
Christie vetoed another Internet gambling bill in March 2011, saying then it would have violated New Jersey's constitution, which restricts casino gambling to Atlantic City. Supporters of the new legislation say the Internet gambling proposal has been revised to address Christie's constitutional concerns.
A new section was added to the Internet gambling bill in December to allow offshore companies to apply for a New Jersey casino license, opening the door for the Rational Group to buy the Atlantic Club. The company, through its PokerStars and Full Tilt Poker brands, is one of the largest online gambling operators in the world.
Rational Group is expected to attract intense regulatory scrutiny in New Jersey. Last year, its PokerStars brand agreed to pay the U.S. government $547 million to settle money-laundering charges that stemmed from a crackdown on illegal Internet gambling websites. As part of the settlement, the company admitted no wrongdoing or guilt and can re-enter the U.S. marketplace in jurisdictions where online gambling is legal.
As a first step toward entering the Atlantic City market, the Rational Group has filed an application with the Division of Gaming Enforcement seeking preliminary approval to acquire the Atlantic Club, a process known as interim casino authorization.
"The division can confirm that an application requesting interim casino authorization and other relief was received from Rational Group," the agency said in a statement Tuesday.
David Rebuck, division director, said New Jersey's regulatory reform and new gambling attractions in the marketplace have made Atlantic City casinos more enticing to potential buyers.
"I have people coming in every week to talk about getting into the market," Rebuck said. "People have a sense there is an opportunity to take on something here otherwise not available elsewhere."
Rebuck said the state has been eager to assist in finding new casino buyers, especially if it means the difference between a property closing or staying open.
"It's in the state's best interest to have a casino in Atlantic City keep operating," he said.
The Atlantic Club sale would close after another agency, the New Jersey Casino Control Commission, follows with final regulatory approval.
As with any application seeking interim casino authorization, the Division of Gaming Enforcement has up to 90 days to conduct its investigation and file a report with the Casino Control Commission. The commission then has up to 30 days to conduct the hearing and make a final decision.
The Atlantic Club has been owned since 2005 by Resorts International Holdings, an affiliate of the California-based private real-estate investment firm Colony Capital LLC.
Rational Group is expected to pay only a fraction of what Colony shelled out for the Atlantic Club, formerly called the Atlantic City Hilton Casino Resort. The then-Hilton was valued at $513 million when it was acquired by Colony in 2005 as part of a $1.24 billion deal for four casinos in New Jersey, Mississippi and Indiana.
Colony bought the Hilton close to the peak of the Atlantic City market, a year before casino gambling began in Pennsylvania. Since then, the sluggish economy and stiff competition from Pennsylvania have driven down Atlantic City's gambling revenue more than 40 percent, from $5.2 billion in 2006 to $3 billion in 2012.
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