Station Casinos to gain $9 million in settlement

Thursday, April 15, 1999 | 10:39 a.m.

The other shoe has dropped in the failed merger of Las Vegas gaming operator Station Casinos Inc. and Fort Worth real estate investment trust Crescent Real Estate Equities Inc.

The companies announced a settlement of lawsuits they filed against each other after the $1.5 billion merger broke up last summer amid Crescent investor uneasiness with the company's foray into the gaming industry. Crescent agreed to pay Station $15 million, which an analyst estimated will translate into a $9 million gain after taxes.

Crescent, the acquirer in the failed merger, sued Station for $54 million in breakup fees. Crescent's suit was dismissed by a federal court in Texas last December.

Station, meanwhile, sued Crescent in Las Vegas for more than $400 million, a figure that included compensation for a $300 million decline in the value of the company's stock. Station also wanted Crescent to buy more than $100 million in Station preferred stock that Crescent agreed to buy as part of the merger.

Glenn Christenson, Station's executive vice president and chief financial officer, said the company decided it was better to settle now than pursue a higher payment through years of litigation.

"The lawsuit was a distraction," said Christenson. "Settling it now makes more sense."

The $15 million payment will settle all claims related to the failed merger. Station will report the cash payment as a special one-time second quarter revenue item.

Credit Suisse First Boston analyst David Anders upgraded his price target for Station stock from $16.25 to $20 after the announcement, saying he expected Station to use the $9 million after-tax gain to pay down debt.

Station stock closed Wednesday at $13.75, up 75 cents.

Documents recently filed in another legal arena, the bankruptcy case of a subsidiary of Santa Fe Gaming Corp., show that Station was not the only Las Vegas gaming company Crescent tried to buy last year. Last July, Crescent made a $229 million offer for Santa Fe. That offer was rejected.