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October 30, 2014

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Isle of Capri will acquire Lady Luck Gaming in $400 million deal

JACKSON, Miss. - Isle of Capri Casinos Inc. said Wednesday it will buy Lady Luck Gaming Corp. in a deal valued at more than $400 million.

Analysts were quick to point out that Biloxi-based Isle of Capri was getting the company at a price considerably lower than what Lady Luck was worth, as well as a lucrative presence in Las Vegas.

Isle of Capri will pay $12 per share, or $59 million, for Las Vegas-based Lady Luck's outstanding shares, $22 million for Lady Luck's preferred stock, and assume the company's $177 million debt.

That, combined with other peripheral details, will push the value of the transaction past $400 million, said Daniel Davila, a senior analyst for leisure and entertainment with South Coast Capital LLC in New Orleans.

"This industry is consolidating," Davila said. "(Isle of Capri) wants to be a preeminent regional provider of gaming-based entertainment. They are quickly becoming the major player in the regional markets."

Shares of Isle of Capri dipped 23/32 to 9-3/16 Wednesday. Lady Luck shares climbed on news of the acquisition, reaching 10-3/16, up 2-1/16.

Both companies said the deal could be finished sometime in the first half of 2000, but regulatory approval will be required from gaming commissions in Mississippi, Iowa and Nevada.

Eric Beder, an equity analyst for HD Brous & Co. Inc. of Great Neck, N.Y., said approval in Mississippi and Iowa would likely come quickly. Approval from Nevada officials may take longer, possibly a year.

"It takes awhile to get approval in Las Vegas because they're not known there," Beder said of Isle of Capri.

Approval from Mississippi's Gaming Commission, will not take as long.

"Since they're already both licensees, it's not a very complicated process," said Mick Lura, chief of staff at the Mississippi Gaming Commission.

Lura said it was likely the commission would sign off on the deal in November or December.

Isle of Capri owns and operates seven riverboat, dockside and land-based casinos, including locations in Tunica, Biloxi and Vicksburg, two locations in Louisiana, and one in Colorado. Isle of Capri operates a harness racing track in Pompano Beach, Fla., and the Enchanted Capri cruise ship that sails out of New Orleans.

Lady Luck operates dockside riverboat casinos and hotels in Coahoma County and Natchez, and has a 50 percent interest in a casino and hotel in Bettendorf, Iowa.

Isle of Capri said it has a letter of intent to buy the remaining 50 percent stake in the Bettendorf operation from the family of its chairman, Bernard Goldstein, in exchange for 6.3 million shares of Isle of Capri common stock. That sale is subject to the completion of Isle of Capri's acquisition of Lady Luck.

Bob Walsh, a spokesman for Lady Luck Gaming Corp., said his company's plans to acquire the Miss Marquette Casino in Marquette, Iowa, for $41.7 million, and the Lady Luck Casino & Hotel in downtown Las Vegas for $45.5 million, will go as planned.

Terms of the acquisition call for Isle of Capri to give Lady Luck a $16.3 million secured loan to buy both properties.

Lady's Luck majority shareholder, chairman and CEO Andrew Tompkins, confirmed Wednesday he would sell the 46 percent of outstanding shares he owns to Isle of Capri.

Rex Yeisley, Isle of Capri senior vice president and chief financial officer, said the deal was forged because it gives his company wider access to casino markets in Mississippi, Iowa and Las Vegas.

"It moves us up the river into the upper midwest and there's no overlap on our existing properties," Yeisley said. "The markets we approach are not dissimilar."

As a result of the impending buy, Yeisley said Isle of Capri would abandon plans to build its own casino in Coahoma County because Lady Luck operates two casinos there - the Lady Luck Country Casino and the Lady Luck Casino Hotel Rhythm & Blues.

Lady Luck's Coahoma casinos have consistently been its major revenue sources, pulling in an estimated $100 million annually.

The acquisition also gives Isle of Capri a 24-acre tract of property in Vicksburg next to Interstate 20 and overlooking the Mississippi River, an ideal location for a casino and one that Lady Luck had been considering for new development.

Yeisley said Isle of Capri has not made any commitments to build on the parcel.

"(We're) certainly not going to let anyone else build there," he said. "If it gets developed it won't be a competitive casino unless we move to that site."

Beder said Isle of Capri will likely take the Lady Luck Casinos, except for the one in Las Vegas, and make them into Isle of Capri-branded operations.

"Isle has this program of Isle stylization, which basically provides and produces an effect in some respects like McDonalds," he said. "You know when you go to an Isle of Capri Casino what you're going to get in all of the casinos. They have centralized the operation."

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