Thursday, Nov. 9, 2000 | 11:19 a.m.
Station Casinos Inc. passed the first regulatory hurdle in its takeover of the Fiesta hotel-casino Wednesday, after the Nevada Gaming Control Board voted to approve Station's $185 million buyout of the popular North Las Vegas locals property.
The deal must still be approved by the Nevada Gaming Commission later this month. If that approval is given, Station hopes to close on its purchase of the Fiesta from the Maloof family in January.
But a big uncertainty remains for the 1,100 employees of the Fiesta, who will be laid off when Station closes on its purchase. Station plans to hire 1,016 people to run the property -- and 412 Station employees have applied for transfers to the Fiesta, said Scott Nielson, Station executive vice president and general counsel. Fiesta employees are applying to keep their jobs at a hiring center at the property, opened Monday.
It is the same situation faced by workers at the Santa Fe hotel-casino, recently taken over by Station. After that buyout, the 900 Santa Fe workers at the property were forced to reapply for their jobs -- a move Station said was necessary because the property was being completely rebranded. That isn't occurring with the Fiesta, which will remain essentially unchanged after the Station takeover.
But Nielson hinted a good portion of workers from the Fiesta will be retained.
"We want to hire the very best to run this property, and we're not rebranding," Nielson said. "They have people familiar with the brand already. We still want to hire the very best, but I think that a lot of people that are now working there have a real good shot of still working there (after the Station takeover)."
Still, Nielson defended Station's decision to make all workers re-apply for their jobs -- and its decision to consider filling hundreds of jobs there with Station employees.
"Our own employees see transfer opportunities as a benefit ... so they can improve the shift they have and their job," Nielson said. "We take that very seriously. We want to give our own people every opportunity to move up."
Nielson said it was unlikely much renovations would be needed at the property, since the Maloof family completed a massive renovation and expansion of the Fiesta in 1999. As a result, the Fiesta isn't likely to close down temporarily when Station assumes control, as happened at the Santa Fe.
As in the Santa Fe buyout, control board officials again examined the question of whether Station would be assuming too much market share by buying the Fiesta, which would be its sixth major property in the Las Vegas area.
But since board members said Nevada gaming regulations didn't define the "locals market," they relied instead on Station's overall market share in Nevada and Clark County. The Fiesta will give Station 7 percent of the Nevada market, and 8 percent of Clark County.
"Clearly, under 10 percent market share shouldn't prevent anybody (gaming customers) from availing themselves of market opportunities," said Steve DuCharme, chairman of the gaming control board. "We did not feel this was anti-competitive."
Though he cautioned that a final determination has yet to be made, he believed the same would prove true for Station's $70 million buyout of the Reserve in Henderson.
"The acquisition of the Reserve would probably be similar (in market share increase to the Fiesta buyout)," DuCharme said.
Station may ultimately own or have partnership interests in nine big properties in the Las Vegas market, including hotel-casinos proposed or under construction in Green Valley and North Las Vegas.
But Station will be picking up some new competition soon; at Wednesday's meeting, the control board gave its approval to Terrible's Hotel and Casino, a Herbst family property scheduled to open at Paradise and Flamingo roads by the end of November.
Owned by Herbst brothers Edward, Timothy and Troy, Terrible's will be a Tuscan-themed, 45,000-square-foot property with 370 rooms, 750 slots, eight table games, a 185-seat bingo hall and three restaurants. The property will be the fourth owned by the brothers, and by far the largest, more than double the size of their Pahrump hotel-casino.
The hotel-casino was built in the shell of the old Continental hotel-casino.
But despite its near-Strip location at Flamingo and Paradise roads, it is expected that 80 percent of the casino's business will come from Las Vegas locals.
"Our property is just off the Strip, and we're truly the only local property on the east side between the Strip and Boulder Highway," said Terrible's General Manager Mark Sterbens.
The property will tie in with the Herbst's slot route operation, E-T-T Inc., in one of the most unusual marketing ties the Las Vegas locals market has probably ever seen.
Customers will be able to use their Terrible's players cards not only at the Paradise Road casino, but at any convenience store slots operated by E-T-T. Points can even be earned by buying gasoline or groceries at Herbst convenience stores and gas stations.
That marketing power gained some muscle Wednesday as well, when the control board approved E-T-T's buyout of Cardivan Co., the slot route operation of Jackpot Enterprises Inc. The final sale price will be $38 million, down from the originally announced price of $45 million.
That buyout will give E-T-T 7,000 slot machines in Nevada, E-T-T officials say, making it the second-largest slot route in the state. The largest is Alliance Gaming Corp.'s United Coin Co., with 8,000 machines. United Coin is being sold for $118 million to UC Acquisition Corp., which is owned by Michael Luzich of Las Vegas and Dan Kehl, an Iowa gaming executive.
Ed Herbst said the opening of the Paradise Road casino probably won't be the brothers' last move in the Las Vegas area -- the next goal, he said, is to own a large locals casino in the city.
"I'd like to build one," Herbst said. "We'll let ourselves catch our breath, and see what we can do next."
In a separate matter, the control board approved, by split vote, a deal that will allow American Wagering Inc. to collect $600,000 from a Mexican company in a deal that settles a legal battle over unauthorized distribution of AWI software.
The deal, signed with Agua Caliente of Tijuana, gives the Mexican conglomerate the right to sell a software package owned by AWI without paying royalties. AWI had sued over Caliente's distribution of sports and race book software in South America without paying AWI royalties.
AWI acquired the software as part of its 1996 takeover of Computerized Bookmaking Systems Inc. (CBS). Because of concerns that Caliente was not fit to be licensed in Nevada, the control board in 1997 ordered that AWI not expand its business relationship with Caliente without control board approval.
In acquiring CBS, AWI inherited Caliente as a customer, though it later struck a deal that left Caliente as a customer of CBS' former owner, Autotote Corp. Since AWI's settlement gave Caliente the right to distribute the software freely, it was considered an expansion of the business relationship, though AWI officials said the deal was the only way they could collect any compensation for four years of unauthorized distribution.
DuCharme and control board member Dennis Neilander voted to approve the deal, but member Bobby Siller voted against it.
"I didn't want to vote for a relationship with a company with questionable suitability (for a gaming license) that hasn't honored any part of its contract (with AWI) to date," Siller said.
AWI has received $150,000 of the settlement already, and should be paid the balance within four months. That's important for the financially struggling company, which was delisted from the Nasdaq exchange earlier this year.
"I think from a financial point of view, it's important, only because we are getting compensated for an asset that's been used for five years," said Robert Ciunci, AWI's chief financial officer. "Our shareholders deserve that money."