Thursday, July 31, 2003 | 11:05 a.m.
The Morongo Band of Mission Indians in Riverside County, Calif., has agreed to acquire a Las Vegas casino developer and assume assets as diverse as a Delaware slot machine operation and a deal to develop a casino for another tribe in Michigan.
The tribe would purchase Full House Resorts Inc. for $20.1 million, including the assumption of $2.4 million in debt.
Full House Resorts Inc. has been based in Las Vegas since 1998, the same year it sold a casino in Deadwood Gulch, S.D. where it began operations as a public company in 1992. The company's primary asset is a slot machine management contract at Harrington Raceway in Delaware, which it acquired in 1995. In 2001, the company bought out a partner's remaining interest in three casino management contracts with Indian tribes.
The company engaged an investment bank last year to explore ways to boost performance such as through a joint venture partner, additional financing or the outright sale of the company, Full House Resorts Chief Financial Officer Michael Shaunnessy said.
The sale to the tribe is the best way to give shareholders a maximum return on their investment because they will receive a significant premium to the market price of their shares, he said.
In the merger, each shareholder of Las Vegas-based Full House Resorts Inc. will receive $1.30 per share. Holders of preferred stock will receive $6.15 per share.
The company's stock -- which has traded under $1 a share for the past year -- rose 44 percent, to $1.15, in early trading today on Wednesday's announcement.
The deal is unusual in that the tribe is buying out an entire company, Shaunnessy said.
Tribes have historically bought or founded individual business ventures such as hotels, he said.
The transaction is expected to close in the fourth quarter of 2003 and is subject to approvals by shareholders, tribal members and regulators. The tribe expects to fund the acquisition from cash reserves and existing credit lines.
For the past few years, Full House Resorts has been busy trying to arrange casino deals.
The company's former president, Gregg Giuffria, resigned from the company in 2000, saying he was interested in pursuing venture capital opportunities and development projects in Northern California and Reno.
Full House Chairman and Chief Executive Officer William McComas stepped in to assume Giuffria's duties and lead an ongoing initiative to build a Hard Rock-brand casino in Biloxi, Miss. That project died after financing fell through, Shaunnessy said.
The company then signed an agreement with the Huron Potawatomi tribe in Michigan to build a casino near Battle Creek. The tribe filed an application with the U.S. Department of Interior to get land for the casino placed into trust, which was approved in August of last year. Shortly thereafter, a citizens group filed suit to halt the project, which is still under litigation in federal court, Shaunnessy said. A separate management contract with an Oregon tribal casino expired in August 2002. The third contract, with a tribe in southeastern Palm Springs, is on hold.
Last year, the company entered into an agreement with a private investment company to buy a 50 percent interest in the Michigan and California projects and provide funding for their development. The company extended a loan to Full House with a due date that was extended into August.
Shaunnessy said he and McComas will leave because of the merger and "intend to pursue other projects."
The Morongo tribe, which operates the Casino Morongo in Cabazon, Calif., is seeking ways to diversify its economic ventures, tribal chairman Maurice Lyons said. The investment "will allow us to bring our gaming management expertise and experience to bear in new markets," he said.
The Morongo tribe in May broke ground on a $250 million casino resort on its reservation. The tribe's Casino Morongo property, once a small bingo hall, became one of the first to offer slot machines after the passage of Proposition 1A. A 1987 Supreme Court case, led by the Morongo and Cabazon tribes, allowed tribes to offer gambling on Indian reservations and set the stage for Proposition 1A, which legalized Las Vegas-style casinos in California.