Second lawsuit challenges Primadonna merger

A second class-action lawsuit has been filed seeking to stop a merger between Primadonna Resorts and MGM Grand Inc. that is said to be unfair to Primadonna shareholders.

Wednesday's lawsuit, filed by stockholder Sharie Yeshua Inc., alleges that Primadonna stockholders could reap greater benefits if there were an "active auction or open bidding procedure" to merge the company with another gaming corporation.

Primadonna officials could not be reached for comment on the suit.

The lawsuit, filed through attorney Mark Albright, claims the Primadonna board of directors may have violated its duty to stockholders by jumping into the MGM merger.

After the agreement was announced in November, Primadonna stock fell a quarter to $8.70 while MGM shares rose nearly a dollar to more than $29, the legal action stated.

In the merger, three shares of Primadonna stock will be exchanged for one share of MGM stock. Currently there are 28.9 million shares of Primadonna stock - 74 percent owned by Chairman Gary Primm -- that would become 9.5 million shares of MGM.

The swap is valued at about $276 million plus $336 million in debt the MGM would assume.

"The intrinsic value of Primadonna's common stock is materially in excess of the amount offered," the lawsuit claimed.

In addition to naming MGM, Primadonna and Primm, the lawsuit also targets Primadonna's board of directors: Robert Armstrong, Maddison Graves, Sig Rogich, Gary Sitzmann and George Swarts.

An earlier lawsuit, filed in November by shareholder Michael Shapiro, also seeks to stop the deal from being completed.

That suit says those terms are "unconscionable and unfair and grossly inadequate" to Primadonna shareholders.

"The consideration agreed upon did not result from an appropriate consideration of the value of Primadonna through open bidding or at least a 'market check' mechanism," the Shapiro lawsuit alleges.

The suit says Primadonna's board of directors breached its fiduciary duty to shareholders by preventing other offers from emerging.

Though subject to shareholder approval, the deal is expected to pass in the absence of court action because the Primm family owns the majority of the company's shares.

In November, Primm called the merger "compelling" for Primadonna's shareholders and said that "by joining with MGM Grand, Primadonna's shareholders will benefit from MGM Grand's financial strength and exciting growth prospects."

Primadonna Resorts owns three hotel-casinos and two golf courses along Interstate 15 at the Nevada-California border 35 miles south of Las Vegas. In addition, it is a partner with Las Vegas-based MGM Grand in the New York New York hotel-casino on the Las Vegas Strip.

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