LV firm's stock plunges 60 percent

With its stock price off nearly 60 percent over the past two weeks, Mego Financial Corp. on Wednesday said its merger with Sycamore Partners LLC is off.

The merger has been on shaky ground since May, when Sycamore asked for a revision in the acquisition price. In March, the companies announced that Sycamore would acquire Mego for $5.71 to $5.75 per share in stock and cash. But in May, Sycamore told Mego it would proceed with the transaction only if the price was revised down to $4.50 per share.

Sycamore is a New York company backed by real estate investment fund Blackacre Capital Group L.P. Mego, based in Las Vegas, develops and finances land parcels and time-shares. The company operates under the names Preferred Equities Corp. and Ramada Vacation Suites.

Mego President Jerome Cohen said Mego told Sycamore in May that Sycamore was in default of the merger agreement. However, Mego continued to try to work the merger out.

"They said they were trying to do a certain comprehensive deal," said Cohen.

However, Sycamore did not provide details of that deal, and Mego finally got tired of waiting, said Cohen.

Mego's stock price has fallen sharply this year, from a high in the $5 range in May, to a close at 7/8 Wednesday. The stock fell 57.4 percent last week alone, from 1 7/32 to 29/32.

Cohen said Mego's falling stock price had nothing to do with Wednesday's decision to terminate the deal.

"We have not had any price discussions since (May)," said Cohen.

In fact, Mego's entire industry segment is also suffering a stock plunge, he said.

"The whole industry is down ... substantially down," said Cohen.

The company will continue to pursue an acquisition or merger partner, Cohen said.

"We're open to a transaction," Cohen said.

Mego also owns Central Nevada Utilities, a utility serving fast-growing Pahrump west of Las Vegas.

Preferred Equities was sued last month in Clark County District Court by a couple alleging consumer fraud in the sale of lots in a subdivision outside Pahrump.

The couple bought their lot in 1984 for $15,575. In January 1995, they paid a $2,380 "betterment fee" for what they though was water line construction. They were later told by the company it would cost $47,000 to extend water service to their lot and subsequently told by Central Nevada Utilities it would take even more, $60,000, to get water service there.

Jon Joseph, general counsel for Preferred Equities, has declined comment on that suit.

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