Jackpot settles suit, will remove slots from 15 Raley’s markets

David Strow

Thursday, Jan. 27, 2000 | 11:16 a.m.

Jackpot Enterprises Inc. of Las Vegas settled its lawsuit against Albertson's and Raley's, a move that will spell an end to Jackpot's operations in 15 Clark County Raley's grocery stores by month's end.

However, Jackpot said it received concessions from Albertson's that will result in more than $18 million in cost savings at the stores where it still does business. Just as importantly, Jackpot preserved its relationship with Albertson's -- by far its most important slot route customer.

Under the terms of the settlement, announced today, Jackpot's leases at the 15 disputed Raley's stores will terminate Monday. Jackpot currently operates 246 slots at the grocery stores, and had said that these operations accounted for about 15 percent of its revenues. Jackpot had revenues of $93 million in 1998.

"We're prepared to go in there on that date (Feb. 1)," said Dave Johnson, general counsel for Alliance Gaming Corp., parent of United Coin Co. -- the company Raley's had chosen to operate in the stores. "It's better late than never."

United Coin has already been licensed by the Nevada Gaming Commission to operate at the locations, but that license was pending resolution of the lawsuit.

Despite the importance of the stores to Jackpot's business, Jackpot's chief executive said the settlement was a key victory for the company.

"This settlement is very favorable to us, both in the short and long term," said Don Kornstein, president and chief executive of Jackpot. "I'm extremely pleased with the terms of this settlement, which not only solidifies Jackpot's critical long-term relationship with Albertson's, but will eliminate distraction and time requirements placed on management."

The lawsuit was triggered after Albertson's sold the 15 stores to Raley's as part of an antitrust settlement with the Federal Trade Commission. Boise-based Albertson's had purchased American Stores of Salt Lake City, owner of Lucky grocery stores and Sav-On drug stores in Las Vegas, triggering antitrust concerns because Albertson's is a big grocery store operator in the Las Vegas market.

Raley's then informed Jackpot it would replace Jackpot with United Coin as the slot operator at its newly acquired Las Vegas stores.

Jackpot argued in its lawsuit that the termination violated its contract with the stores, which ran through 2011. Raley's and Albertson's responded that Jackpot's contract contained no provisions compelling a new owner to honor those contracts.

In exchange for dropping the lawsuit and vacating the disputed stores, Jackpot said it received an exclusive option to extend its leases at the Albertson's and Sav-On Drug Stores where it now operates. Further, Jackpot said it will receive "substantial rent reductions and certain immediate credits toward rent payments" for its operations at those locations.

"Based upon the amended terms and certain assumptions, management believes that the estimated cost savings over the initial term of the amended agreements could exceed $18 million," Jackpot's announcement said.

Albertson's is by far the largest customer of Cardivan Co., the slot route subsidiary of Jackpot. Currently, Cardivan operates slots at 39 Albertson's and 38 Sav-On stores in Nevada, Kornstein said. Kornstein declined to reveal how many slot machines were at those stores.

Jackpot will also receive exclusive gaming rights to future "fuel center locations" developed by Albertson's. Kornstein described these as combination convenience stores and gas stations that Albertson's plans to open near its grocery store and drug store operations.

"Albertson's will take on a pretty aggressive posture in the market of these new store openings, including these fuel centers," Kornstein said.

In midday trading, Jackpot stock was at $10.50, down 44 cents.