Shareholder seeks sale of Jackpot Enterprises

John Wilen

Friday, June 5, 1998 | 10:33 a.m.

A Miami investment group with a stake in Jackpot Enterprises Inc. is trying to force the Las Vegas company to put itself up for sale.

Kenneth Pavia Sr., general partner of Bolero Investment Group LP, has filed a series of documents with the Securities and Exchange Commission trying to force Jackpot to add language to its 1998 proxy statement that would allow shareholders to vote on whether the company should be sold.

Jackpot is an operator of route slot machines -- gaming machines in retail locations. The company operates 4,000 machines at 400 locations. The company also operates small casinos in Battle Mountain and Jackpot, which it has been trying to sell for more than a year.

Bolero owns 462,000 shares of Jackpot stock, or 5.3 percent of the company. Pavia, who as Bolero's general partner is considered beneficial owner of the shares, accuses Jackpot's executives of mismanagement.

"The submission ... was based on the perception that the company was facing a variety of challenges that management was unable or unwilling to address," said Pavia in a letter to Don Kornstein, chief executive of Jackpot.

In an interview, Pavia was more blunt.

"It's wasting time," Pavia said of the company's current management. "It's employing Mr. Kornstein handsomely."

A call to Kornstein was not returned.

Pavia's biggest beef is based on his belief that Jackpot recently rejected an acquisition offer.

"We have heard that one party made a written offer," Pavia said. "We have heard that it was rejected. We think if that's the case, if that's true, that management has an obligation to announce that to shareholders."

In his first SEC filing, made in January, Pavia asked the company to add a special item to its 1998 proxy statement -- the annual ballot that seeks shareholder approval of routine matters like the re-appointment of a company's board of directors.

The item would ask shareholders to approve a measure directing Jackpot's board to "immediately take the necessary steps to achieve a sale, merger or other acquisition of the company on terms that will maximize shareholder value as promptly as possible."

"Shortly thereafter," Pavia writes in a filing made this week, "I began to receive phone calls from individuals and entities regarding the potential sale of Jackpot. The reports were specific in nature and identified the potential buyer as well as the range in which the offer was being allegedly made."

Pavia declined to disclose the entity which made the acquisition offer. He said his company takes an average of six phone calls each week from other investors who support his proposal.

In addition to the rejected acquisition offer, Pavia fault's Kornstein's use of Jackpot cash. The company had $47.9 million in cash on hand at the end of its 1997 fiscal year -- nearly $6 per share, Pavia said.

Ultimately, he wants Jackpot's managers to invest the company's cash or step out of the way.

"The industry is consolidating and shrinking," Pavia said. "The company has almost $6 per share in cash. ... Unemployed cash in the greatest bull market in the history of the country is disingenuous at best."

Jackpot stock closed at $12.19, down 31 cents per share Thursday. In the past year, the stock has traded as high as $13.94, and as low as $10.63.