Las Vegas Sun

November 19, 2018

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Las Vegas-based slot route operation sold for $118 million

An investment group led by a Las Vegas man and an Iowa riverboat casino operator is buying Alliance Gaming Corp.'s United Coin Machine slot route division.

United Coin has more than 8,000 slot machines in Nevada in locations like bars and supermarkets.

Officials of Las Vegas-based Alliance announced today they signed a letter of intent to sell the unit for $118 million to UC Acquisition Corp. LLC, led by Michael Luzich of Las Vegas and Dan Kehl, general manager of the Catfish Bend and vice president of the Mississippi Belle II, two Iowa-based riverboat casinos.

The sale agreement includes a price of $112 million cash, $6 million in preferred stock and the signing of a supply agreement ensuring that United Coin will buy a minimum of 2,500 gaming devices from Alliance's Bally Gaming Inc. over the next five years.

Alliance also was granted the right to buy a 10 percent equity stake in United Coin at the time of closing, which the companies expect to occur by July 31. The sale involves United's Nevada slot route and not a Louisiana route.

"This is a major step in the process of reducing our overall debt burden," Robert Miodunski, president of Alliance, said in a statement.

"After the payment of fees, expenses and certain lease obligations, we will reduce our bank debt in excess of $90 million," he said. "We are very pleased with the overall structure of this transaction and in our continuing involvement through the supply agreement and potential equity interest."

In a telephone interview this morning, Kehl said there are no personnel changes anticipated following the transaction.

"We plan to keep all the United Coin folks on board," Kehl said. "They've got a great track record and with our funding, we expect to further develop the technology that has set United apart from the rest of the marketplace."

The deal is contingent upon regulatory approvals and Kehl said he hopes that would be completed within a year. Kehl, whose family has gaming interests in Iowa, Missouri, Louisiana and Argentina, would be entering the Nevada market for the first time.

Luzich, his Las Vegas-based partner, is a gaming developer and a major shareholder in AB Capital, Los Angeles, which bought the Diamond Jo Casino, a riverboat in Dubuque, Iowa, last year.

For Kehl, the acquisition represents an expansion by his company, which has no previous slot route experience. In addition to holding equity positions in the two casinos, Kehl's company has an operation that builds and refurbishes riverboats.

Kehl has a 51 percent ownership position on the Catfish Bend, a riverboat that splits its time at Mississippi River ports in Burlington and Fort Madison, Iowa. The company also owns the Mississippi Belle II, ported at Clinton, Iowa.

The Kehl family opened the nation's first modern-day casino riverboat in 1991.

The boat-building division builds and sells new and refurbished boats on speculation and currently has 15 in waters in the United States and Argentina. Among them are boats owned by Station Casinos Inc. in St. Charles, Mo., and several in Louisiana, Kehl said.

Kehl said the purchase agreement doesn't specify that his company must place the machines it buys from Alliance on the United Coin slot route -- the largest slot route operation in Nevada. But he anticipates the machines will go there and not in the family's riverboat casinos.

"The (Nevada) market itself continues to grow and we feel there is some opportunity to replace or upgrade some of the machines with the Bally games on the route," Kehl said.

The deal represents a major opportunity for Alliance to reduce debt, but it also could trigger takeover bids.

United Coin has been Alliance's most profitable asset. In the fiscal year ending in June 1999, slot routes produced 38 percent of Alliance's $458 million in revenues, more than any other division. Revenues and cash flow have increased at United Coin over the past five years.

The sale of United Coin will give Alliance the opportunity to pare $330 million in debt the company has. Company officials said the company's other major asset, the Rainbow Casino in Vicksburg, Miss., wouldn't attract a fair price because the status of a potential competitor's project is tied up in a court proceeding.

Alliance put the United Coin division on the market in late March. At the time, analysts said if it was sold, Alliance could become a takeover target because its Bally Gaming unit is the nation's No. 2 slot machine manufacturer behind International Game Technology of Reno.

This morning, Alliance's stock price was trading at $2.12, down 19 cents from Friday's closing price. The stock was trading in the $9 range in late October.