Jackpot shareholder crops criticism of merger

Tuesday, April 20, 1999 | 11:08 a.m.

Jackpot Enterprises Inc. dissident shareholder Robert Nichols has withdrawn his opposition to Jackpot's $424 million acquisition of Players International Inc., an Atlantic City-based operator of riverboat casinos in the Midwest and South.

Nichols, a Los Angeles-based investor who controls about 1.6 percent of Jackpot's common stock through his firm, Windward Capital Management Co., has been a vehement critic of Las Vegas-based Jackpot and its chief executive, Don Kornstein. He has vowed to oppose Jackpot's recent acquisitions, and has filed Securities and Exchange Commission documents seeking to force Jackpot to disclose acquisition offers he believes the company has received.

But Nichols says he changed his mind about Jackpot's acquisition of Players after Jackpot dropped plans to acquire another company, CRC Holdings Inc., a privately-held Miami company that does business as Carnival Resorts & Casinos. The CRC acquisition was dropped after the owner of a Canadian casino managed by CRC refused to approve a change in CRC's ownership.

"With them gone, we completely re-analyzed the entire picture," said Nichols.

Privately-held CRC was difficult to value, said Nichols. And Jackpot's plan to pay for the company with 3.5 million shares of Jackpot stock and $25.8 million in notes simply gave CRC principals too much control over Jackpot, he said.

Players, a public company, is much easier to value, said Nichols. And while Players carries a lot of debt, Jackpot generates more than sufficient cash flow from its slot route operations to service that debt, he said.

"I think it makes a lot of sense for Jackpot to acquire Players," said Nichols. "It brings together attractively positioned gaming operations, strong operating management and, together with Jackpot's financial resources, the combined company should be able to pursue additional gaming acquisitions that will deliver excellent future earnings visibility."

Jackpot operates 4,200 slot machines in Nevada and owns two small casinos in Northern Nevada.