Tuesday, Feb. 4, 1997 | 11:59 a.m.
Although Atlantic City-based Players International Inc. has signed a letter of intent to sell the Players Island hotel-casino in Mesquite to a rival company there, corporate officials are hoping a better offer will come this month from a Las Vegas operator.
Players executives are courting another buyer in an effort to salvage what has turned into a financial disaster for shareholders.
"We're aggressively pursuing other buyers," said John Groom, corporate chief operating officer for Players Island. "We're looking to get better value for our shareholders."
Groom is shopping the 500-room resort, spa and 7,011-yard par 72 course designed by California architect Cal Olson to Las Vegas properties to beat an offer from Robert "Randy" Black Sr. Black operates the privately held Virgin River hotel-casino in Mesquite.
Players International put the Mesquite property on the market last week in the wake of reporting $1.4 million in losses in its 1997 fiscal year third-quarter quarterly earnings report.
Players signed a letter of intent with Black, who has made other offers for the property in the past. Financial terms of the agreement were not disclosed, but Groom termed it "a low-ball offer."
Industry insiders said the offer is about $26 million, less than one-third the $88 million Players has invested in the property.
Dave Ehlers, chairman of Las Vegas Investment Advisors, said if Black gets $26 million for the Players Island resort, it would be "a bloodbath for Players' stockholders."
Players International has $188 million to $190 million in stockholder equity. Based on the current reported price, the sale would represent an after-tax loss of 20 percent of company's total equity.
"They drastically overbuilt the neighborhood, in retrospect," Ehlers said of Players' entry in the Mesquite market. "It just didn't make any sense."
The company retained the right to negotiate and accept offers from other parties prior to Feb. 28. If Players accepts an offer from a third party or does not sell the Mesquite property to Black, it would be required to pay an undisclosed fee to Black.
Paula Briscoe, executive secretary to the general manager at the Virgin River hotel-casino, said the company has no comment on the deal and that Black would not comment.
Although Players would have to pay Black if the deal falls through, it's clear Groom would like to see another operator take over the pink resort at the south end of Mesquite, about 80 miles north of Las Vegas on the Arizona border.
"It would be such a steal for anyone in Las Vegas," said Groom. "Someone could come in and get this at a very, very good price. They could get our whole resort for a little over what it cost us to put in the golf course."
When asked which companies Players has approached, Groom said he has been to "the obvious ones ... Mirage, ITT and Hilton." Groom admitted that the timing of his pitch has been unfortunate in that ITT and Hilton were embroiled in the issues involved in Hilton's hostile takeover bid for ITT last week.
Groom said Players is selling the Mesquite property because it has become too expensive to market and that it would take several years for Players International to generate enough repeat business to make it profitable. Players has been offering rooms at the resort at no charge to Las Vegas residents in a bid to generate business in the casino, restaurants, spa and golf course.
That's why Groom is so intent on finding a Las Vegas buyer -- so that a company that already spends money to funnel traffic to Southern Nevada could establish Mesquite as a golf and spa getaway resort for visitors spending more than a couple days in Las Vegas.
The quick-trip golf and spa getaway concept is heating up this month with the opening of a new golf course at Primm, 40 miles south of Las Vegas. Primadonna Resorts Inc. is getting rave reviews for its Primm Valley golf course just south of the company's three Primm resorts, Primadonna, Whiskey Pete's and Buffalo Bill's. Unlike Players, Primadonna has a presence on the Las Vegas Strip -- it is a 50-50 partner with MGM Grand at New York-New York.
Primm is accelerating its bid for Las Vegas getaway traffic with plans for another golf course, a retail outlet, a new convention center and more theme park rides. Buffalo Bill's already is home to the nation's tallest roller coaster and has the advantage of being between Las Vegas and its biggest tourist market, Southern California.
Pat Rogers, vice president and general manager of Players Island, said the property is doing better than it did when it first opened. However, Las Vegas Convention and Visitors Authority statistics indicate visits to Mesquite were down 2 percent last year.
When the resort's golf course opened in the fall, the company split its marketing resources, going after Las Vegans as a getaway property while also targeting residents of Utah and western Colorado.
Groom said the management team of the Mesquite property is highly skilled and "that somehow gets lost in all this."
"The people inside the company say that in the long run, Players Island will be a success," said Peter Aranow, executive vice president of finance with Players International. "The second or third buyer should do very well. We just didn't have the patience or capital to see this through."
Instead, Players is focusing on its properties in Lake Charles, La., a joint development with Harrah's in Maryland Heights, Mo., opening in March, and a riverboat on the Ohio River in Metropolis, Ill.
Players International's Lake Charles resort is one of three within about a one-hour drive of a 2.4 million population base in Houston. The joint effort with Harrah's at Maryland Heights is a bid to enter the St. Louis market.
Howard Goldberg, CEO of Players International, explained the board of directors' direction when earnings were posted.
"Our decision to sell Mesquite reflects our belief that it is critical to focus our resources on Players' key assets at this time," said Goldberg. "We are committed to improving profitability over the long term at our Lake Charles and Metropolis properties through both careful cost controls and aggressive marketing programs.
"Our Maryland Heights development is on schedule for a March opening and we are very enthusiastic about our opportunity together with Harrah's, to achieve a solid position in the St. Louis market."
Aranow said Black approached Players about buying the Mesquite property "some time ago" but that the company's board of directors didn't decide until recently to sell. Aranow said Black will complete due diligence meetings in the coming weeks. When that research is complete, Aranow said a formal price would be determined.
For the first nine months of the company's fiscal year, ending Dec. 31, Players International reported a net loss of $513,000 (2 cents per share) compared with a 1995 net loss of $18.6 million (57 cents per share). The current fiscal year includes pretax charges of $1.2 million and $3.1 million and after-tax charges of $726,000 and $1.9 million for pre-opening expenses. It also reflects a restructuring charge of $9 million.
The first nine months of 1995 included pretax charges of $1.4 million and $7.5 million related to preopening costs.
Revenues were flat at $218.9 million for the first nine months of 1996 compared with $218.6 million in the same period in 1995.
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