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Boyd Gaming makes offer to buy Station Casinos

Updated Wednesday, Dec. 16, 2009 | 4:02 p.m.

Station Casinos properties

The clock tower of the Boulder Station hotel-casino obscures the resort's 15-story tower. Launch slideshow »

Boyd Gaming Corp. of Las Vegas today made another offer to buy Station Casinos Inc. -- this one for $2.45 billion for the company with 18 casinos and hotel-casinos in Southern Nevada.

With Station carrying $6.8 billion in debt and other liabilities and operating in Chapter 11 bankruptcy, acceptance of the $2.45 billion offer likely would cause creditors and investors to take billions of dollars in losses.

But, Boyd Gaming officials said, the $2.45 billion in cash and assumed debt represents today’s economic realities that have slashed the value of Station’s hotel-casino properties.

Station, which also operates a big casino for an Indian tribe in the Sacramento area, said today its board, advisors and stakeholders would review Boyd's latest offer.

Station earlier this year rejected a more limited $950 million offer from Boyd for certain Station assets.

"The company is currently in the process of negotiating with its creditors toward an overall plan of reorganization that is in the best interests of the company and its stakeholders. The company’s exclusive period to propose a plan of reorganization was recently extended by the court until March 25, 2010. To date, the board has made no determination to pursue, nor has the company taken any steps toward pursuing, a sale of all or any portion of the company’s assets,'' spokeswoman Lori Nelson said.

Boyd, one of just a few gaming companies considered to be in sound financial shape and capable of buying Station without over-leveraging itself, has been persistent in pursuit of Station.

And Station, the Las Vegas locals’ market leader, has consistently rejected Boyd’s expressions of interest.

Today’s offer was nonbinding and is subject to due diligence by Boyd.

"Combining Station with our current portfolio is consistent with our strategy of growing our presence in the Las Vegas locals market. The transaction contemplated by this proposal will allow us to leverage our 35 years of operating experience in the Las Vegas market to maximize the full potential of Station’s assets. Given this compelling strategic fit, and Boyd Gaming’s position as a licensed operator with strong financial capabilities, we continue to believe that the acquisition of the Station assets by Boyd Gaming is the optimal way forward for Station and will create the most value for Station’s creditors," Boyd said in a letter to Station.

"Importantly, Boyd Gaming is in the best position to execute a smooth transition of ownership and operate the Station properties efficiently from day one. We believe our proposal is in the best interests of Station’s employees, vendors, customers, and the Las Vegas community as it will help to strengthen the local economy and preserve thousands of jobs," the Boyd letter said. "We believe our offer price represents fair value to Station’s stakeholders and takes into account current market conditions, our deep knowledge of the gaming industry and Station’s publicly disclosed financial performance."

"Our proposal to acquire both the 'OpCo Assets’ and the 'PropCo Assets’ reflects the belief that there is more value in keeping these assets together rather than separating them. We believe that combining Station’s assets with Boyd Gaming will result in the greatest number of benefits for stakeholders," the letter said.

(Station has two groups of properties, OpCo and PropCo).

The line in the letter about keeping the assets together is an apparent reference to discussion in Station’s bankruptcy case that, if a compromise isn’t reached with lenders, the PropCo lenders may take control of four of Station’s top-performing casino-hotels.

Those properties – Red Rock Resort, Sunset Station, Boulder Station and Palace Station – are encumbered by $2.475 billion in debt.

With the recession reducing revenue and cash flow at Station, and other creditors attacking the $2.475 billion mortgage, Station last week gained bankruptcy court approval to temporarily lower the rent it pays to itself to lease those four properties. The rental payments have been covering the mortgage.

Boyd, a creditor in Station’s case after picking up some $2 million of Station debt, could face antitrust or competition questions if it bought all of Station.

That’s because such a deal would combine Station with four of Boyd’s generally locally-oriented properties: Sam’s Town, the Gold Coast, the Orleans and the Suncoast. Boyd is also a big operator in downtown Las Vegas, where Station isn’t a player.

Nevada gaming regulators and potentially others could look at the competitive effects of such a deal.

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