Golden Nuggets in LV, Laughlin being sold

By Liz Benston

Thursday, June 26, 2003 | 11:02 a.m.

MGM MIRAGE said today it agreed to sell its Golden Nugget casinos in downtown Las Vegas and Laughlin in order to strengthen the company's balance sheet and focus on growth opportunities elsewhere.

Poster Financial Group, a private investment firm established by the founding members of Internet travel seller Travelscape.com, expects to purchase the properties for about $215 million before the end of the year.

Partners Timothy Poster and Thomas Breitling, who are in their mid-30s, said they intend to keep the properties' more than 3,500 employees as well as a contract established by the Culinary Union at the downtown casino.

They said they are fulfilling a longtime dream of owning a Las Vegas casino and expect to use a hands-on approach to management that will set the property apart from the corporate-run casinos that now dominate Las Vegas.

"We always felt the market really needed a very nice, classic hotel-casino that was owned and operated," Poster said.

"Hotels have gotten so big that they have lost some of that intimate environment," Breitling said. "We want to bring that back."

Steve Wynn took over the 1,907-room Golden Nugget at age 30 -- the beginning of his storied career in the casino business. Wynn today called the sale a "wonderful new chapter" at the 57-year-old property.

"They are exactly the right age to own that (casino). It does best in entrepreneurial hands," Wynn said.

MGM MIRAGE said it expects to report a "modest gain" on the sale.

"The sale of these two properties reflects our company's continued commitment to maximize shareholder value," MGM MIRAGE Chairman and Chief Executive Officer Terry Lanni said in a statement.

Analysts reacted favorably to the news.

"The sale ... allows (MGM MIRAGE) to concentrate its marketing and (capital spending) efforts on core high-end properties," J.P. Morgan analyst Harry Curtis wrote in a research note to investors today.

The sale will allow the company to reduce debt but may dilute earnings per share by 3 to 5 cents, he said.

That the property was available for the right price has been an open secret in management circles, Jefferies & Co. gaming analyst Larry Klatzkin said.

"They're different properties from the rest of the company and they take as much time to run as a bigger property," Klatzkin said.

Downtown Las Vegas casinos have had an uphill battle trying to cultivate customers lured by the glamour of the Las Vegas Strip. They also face increased competition from tribal casinos in neighboring states that offer more convenient gambling and more reasonably-priced accommodations than the Strip, analysts say.

The partners are bullish on downtown and say they are working on a number of aggressive marketing ideas to drive traffic to the region.

"Downtown has been to this day and for decades one of the most exciting hubs and meccas for Las Vegas-style entertainment and gambling," Poster said.

They intend to improve business at the property with "strong contacts within the travel industry" and experience using Internet technology to fill hotel rooms, he said.

Poster and Breitling founded a Las Vegas hotel reservation business that evolved into Travelscape.com Inc. The pair sold the booking agent to competitor Expedia Inc., an Internet travel reservation hub spun off by Microsoft, for $95 million in stock in 2000.

Las Vegas was the top destination choice of customers using Travelscape, which brought millions of visitors to Las Vegas over the years, Poster said.

"We do know how to fill rooms," he said. "We also know how to provide tremendous value to our customers."

Casinos require hands-on management style that's different from operating an Internet business, Breitling added.

"We intend and expect to be on property almost every day of the year," he said. "I think the customers always like to know who's operating the casino and have a relationship with them."

The Golden Nugget is among the most well-known brands in the casino business and is also considered the jewel of downtown, Poster said.

"We believe we can attract the type of customers that were previously directed to Las Vegas Strip properties," he said.

The Golden Nugget has "never had a losing year" and "cost more than all of Fremont Street put together," Wynn said.

Wynn acquired the Golden Nugget in the early 1970s and purchased the 304-room Laughlin property in 1988, renaming it Golden Nugget Laughlin. The Golden Nugget dates from 1946 and is now downtown's largest resort, with 1,260 slots, 58 tables and 29,000 square feet of meeting and banquet space. MGM Grand Inc. acquired the properties when it bought Wynn's Mirage Resorts Inc. in 2000.

The acquisition will be funded in part by Poster Financial Group, which has received a financing commitment from the investment banking firm Lehman Brothers, which is advising the company on the purchase.

Poster, a board member of locals' casino operator Station Casinos Inc., also said today he would resign from the board.

Poster had served on Station's board since June 2001.