Jackpot looking at new stock, merger options

David Strow and Grace Leong

Tuesday, Sept. 14, 1999 | noon

After watching two mergers fall through this year, Las Vegas-based Jackpot Enterprises Inc. said today it's hiring an investment banker and is "evaluating strategic alternatives."

"Given the attractiveness of the company's financial position, the board believes that it should look to the outside for assistance in considering possible alternatives," Jackpot President and Chief Executive Don Kornstein said in a statement. "Therefore, Jackpot will retain an investment banker to explore all possibilities for enhancing shareholder value."

The company did not elaborate.

But such language typically indicates a company is looking for new acquisition targets, or is looking to be acquired itself, or is looking at actions like a stock buyback in order to boost its share price.

Kornstein was attending Jackpot's shareholder meeting this morning and could not be reached for comment.

In August, Jackpot found itself outbid by Harrah's Entertainment in its attempt to acquire Players International, an Atlantic City-based riverboat casino operator. Harrah's will pay $425 million. Jackpot received a $13.5 million termination fee from Players in connection with the failed deal.

Four months before, Jackpot's $71 million merger with Miami-based CRC Holdings Inc. was called off after a Canadian casino managed by CRC objected to the deal, saying that it believed the Jackpot acquisition was not in its economic interest.

Both deals were attempts by Jackpot to diversify away from its main slot route operations business.

The company is also engaged in a bitter legal battle to keep its slot machines in the Clark County stores of Albertson's, which are being acquired by Raley's.

Albertson's is selling the stores to Raley's as part of an antitrust settlement with the Federal Trade Commission over its merger with American Stores, and the new owner selected Alliance Gaming Corp. to operate slots in its stores. Jackpot sued in late August to try to keep its slots in Raley's stores.

Albertson's officials said in depositions in the Jackpot lawsuit that Jackpot didn't object to the merger until it lost a bid in June to Raley's to operate the slots.

Should the court grant Jackpot's request for a restraining order, this would have "grave consequences on Albertson's (antitrust) agreements with Raley's and the Federal Trade Commission and the attorney generals of Nevada, California and New Mexico," said Chip Cole, Albertson's vice president of litigation and regulatory affairs, in his deposition.

Albertson's and Raley's say that Jackpot didn't have a provision in its contract allowing operations to continue at the Albertson's locations in the event of a sale.

Cole and William Arnold, Albertson's vice president of real estate, both said in depositions that at the time a 1998 license between Jackpot and Albertson's was executed, they had not been informed by the Federal Trade Commission of any requirement to sell any Albertson's supermarkets as a condition of approval for the American Stores merger.

Arnold said the 1998 agreement didn't grant Jackpot a leasehold or other property interest in any store location.

The Nevada Gaming Control Board approved an application by Alliance Gaming to take over the gaming licenses at 15 stores now operated by Jackpot. After a long debate, however, the board said that the licenses would only take effect after Jackpot first surrendered its licenses. Nevada law prohibits two companies from holding licenses for the same establishment.

Jackpot says the Albertson's stores involved in the dispute account for 15 percent of its revenues. The company recorded $93 million in revenues in 1998.