Jackpot in $424 million gaming deal

Jackpot Enterprises Inc. said today it will buy Atlantic City-based Players International Inc. for $424 million, the latest in a series of moves by the Las Vegas company to diversify out of the slot route business.

Jackpot will pay $8.25 per share for Players, consisting of $6.75 in cash and $1.50 in Jackpot common stock. The $424 million purchase price includes the assumption of $160 million in debt.

In 1998, Players generated about $61.5 million in cash flow, according to a Jackpot statement.

The deal is subject to shareholder and regulatory approvals, and is expected to close in the second half of 1999.

"The transaction is expected to be accretive on a pro forma basis to Jackpot's earnings per share for its fiscal year ending June 30, 2000," said Don Kornstein, Jackpot's president and chief executive, in a statement.

In mid-day trading today, Jackpot shares were down 38 cents to $8.88, and Players stock was up 69 cents to $6.69.

Players owns five riverboat casinos in the Midwest and South, and a racetrack in Kentucky. Jackpot operates 4,300 gaming machines on a slot route, and owns two small casinos in Northern Nevada it has been trying to sell for years.

"We're buying three properties that have growth potential associated with them" Kornstein said in an interview.

Jackpot will finance the deal with cash on hand, bank borrowings and long-term debt.

The acquisition is the second announced by Jackpot in recent months. At the end of October, the company said it would buy Miami-based CRC Holdings Inc. for $71.3 million in Jackpot stock. CRC is a privately held company that owns part of a Louisiana riverboat, and operates an Indian casino near Toronto. CRC also has agreements to develop a casino at Lake Las Vegas and operate an Indian casino in Washington state.

Russell Roth, editor of the Las Vegas Investment Report, said the acquisitions are part of a Jackpot strategy to diversify its assets beyond the slot route business.

"It's been their plan for some time," said Roth. "In a general way, I'd have to say this is a good move."

Most analysts agree that Jackpot got a fair price for Players, which has looked for a buyer for some time. In November, Players turned down an unsolicited $350 million, $6 per share offer from Inglewood, Calif.-based Hollywood Park, calling it "inadequate."

"I think it's great, I think Players is doing the right thing," said Bruce Turner, an analyst at Salomon Smith Barney.

"I believe that that's a fair bid," said Dave Ehlers, chairman of Las Vegas Investment Advisors. "This (Players) has been well-shopped."

But two dissident Jackpot shareholders, who want Jackpot to be sold, continued their criticism.

"I'm not in favor of any combination of Jackpot and any company that is run by Mr. Kornstein," said Bob Nichols, chairman of the Los Angeles investment firm Windward Capital Management, and beneficial owner of 123,000 shares, or 1.4 percent of Jackpot.

"They've been fairly insensitive to shareholder needs," said Ken Pavia, a Miami investor who controls 5.4 percent of Jackpot.

Kornstein declined to respond directly to Nichols and Pavia.

Nichols criticized Jackpot's decision to delay its 1998 annual shareholder meeting, which had been scheduled for December. The company has said it will hold a special meeting to approve the CRC deal, but the meeting has not yet been scheduled.

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