Casino operator, Rainforest cancel merger

Tuesday, Jan. 25, 2000 | 11:24 a.m.

Lakes Gaming Inc. and Rainforest Cafe Inc. said Monday they've terminated their previously announced merger agreement due to "negative reactions" from shareholders.

The companies said last month they'd agreed to merge, with Rainforest holders getting 0.55 share of Lakes Gaming stock for each Rainforest share. Eleven days ago, Rainforest said it had received an unsolicited $125 million cash and stock offer from an unidentified publicly traded company.

It appeared to back off from that definitive statement Monday, however, when Rainforest President Kenneth Brimmer said, "We have had initial exploratory conversations in response to a third party's preliminary request to consider acquisition discussions."

"There is no assurance that any offer to purchase Rainforest Cafe will be received and there is no assurance any such acquisition offer would be on terms and pricing acceptable to Rainforest Cafe," he said.

If Rainforest consummates a merger within six months, it would be liable for a $2 million termination fee payable to Lakes Gaming.

Brimmer, who chaired a special committee considering the two offers, said in a statement Monday reaction to the Rainforest-Lakes deal "has been negative, both as to the diversification and the pricing, using current trading prices, in the transaction."

Lakes stock fell after the original deal was announced, dropping the value of the all-stock transaction below $100 million from $108 million. Lakes stock closed Monday at $7.6875 a share, down 18.75 cents, while Rainforest gained 25 cents, closing at $4.375.

Lyle Berman, chairman of both Lakes and Rainforest, said, "Lake is unwilling to participate in an auction for Ranforest and isn't prepared to increase its offer."