|By Matthew Crowley, Las Vegas Review-Journal|
Knight Ridder/Tribune Business News
Nov. 11, 2004 - Barrick Gaming Corp. expanded its Southern Nevada portfolio on Wednesday, acquiring the Golden Nugget Laughlin for $31 million from Poster Financial Group.
The deal, which the companies expect to close in the first quarter of 2005, requires state and federal regulators' approval. The deal includes working capital at the sale's closure, and grants Barrick rights to use the Golden Nugget name for up to two years.
Barrick Gaming co-founder and President Stephen Crystal said his company plans to keep the Golden Nugget Laughlin's current staff and plans no layoffs. The 300 room hotel-casino has about 1,000 workers.
The Golden Nugget Laughlin is Barrick's third big Southern Nevada acquisition this year. The company in March acquired Jackie Gaughan's four principal downtown hotel-casinos -- the Plaza and its seven additional acres, the Las Vegas Club, the Western Hotel and the Gold Spike -- for $82 million. Last month, the company bought the Queen of Hearts and Nevada hotel-casinos for $7.1 million.
In a conference call Wednesday announcing Poster Financial Group's third-quarter earnings, Poster Financial Chairman and Chief Executive Officer Tim Poster said finances drove this company's decision to sell the Golden Nugget Laughlin.
"During the quarter, we received several unsolicited and attractive offers to purchase the Laughlin property," Poster said. "Careful analysis has brought to light the different rates of return on capital reinvestment in our two hotel-casino properties. It is evident that the rate of return has, and will continue to be, greater at the Las Vegas property."
Meanwhile, Poster said his company would use proceeds from the Golden Nugget Laughlin to repay and reduce debt. In a statement, Poster Financial said it expects a modest gain from the sale, but gave no specifics.
Barrick's Crystal said his company sees similarities between its Laughlin and downtown Las Vegas purchases. Both markets attract value-seeking customers, both are ripe for consolidation, and both have untapped potential, he said.
"While both markets have been criticized for not being growth markets, in fact both markets are showing recently that they are in a growth mode," Crystal said. "Laughlin is over time going to grow as a community and as a place where people will retire to."
Crystal said he expects to rebrand the property before the two-year name-rights period ends.
"We hope not to rely on the (Golden Nugget) name for long," he said. "We hope to rebrand as soon as is practical."
Meanwhile, Poster Financial reported a pro forma net loss and a sharp drop in cash flow during the third quarter ended Sept. 30, hurt by low table-game hold percentage.
In a statement, the company said it had, on a pro forma basis, a net loss of $8.7 million the quarter ended Sept. 30, compared with a net loss $900,000 a year earlier. These amounts reflect the acquisition of the Golden Nugget Las Vegas and Golden Nugget Laughlin casinos and related financing transactions as if they had occurred at the beginning of 2003.
On Jan. 23, Poster Financial completed the acquisition of the properties for $213.7 million, consisting of a $215 million purchase price (adjusted to $210.2 million for working capital and other adjustments at the closing date) and approximately $3.5 million in transaction fees.
Also for the third quarter, Poster Financial said it had pro forma negative cash flow, defined as earnings before interest, taxes, depreciation and amortization, of $300,000, compared with positive cash flow of $6.7 million a year earlier.
Pro forma consolidated revenue rose 6.8 percent to $60.9 million from $57 million.
Despite the results, Poster remained upbeat. During the conference call, he said other key business indicators were up in the quarter, including occupancy percentage and average daily rate. Slot handle and table-game drop also increased, he said.
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