Sun backs out of Desert Inn deal

Thursday, March 2, 2000 | 3:52 a.m.

Sun International Hotels Ltd. announced Thursday it is pulling out of its $275 million deal to buy the Desert Inn hotel-casino from Starwood Hotels & Resorts Worldwide Inc.

The squelched deal was apparently caused by Sun International's plans to go private, announced in January.

"There's concern that could delay the review process (before the Nevada Gaming Commission)," said Dan Gibson, spokesman for Starwood. "At the same time, Sun could use the $275 million as they're taking their company private. They've got plenty of other uses for cash right now."

Gibson said Starwood will immediately put the property back on the market, though no buyers have been lined up yet. Starwood is in the process of divesting its gaming assets.

The controlling shareholders of Bahamas-based Sun International announced in January their plans to purchase the 47 percent of the company they don't already own for $378 million. The group is led by South African billionaire Sol Kerzner.

Sun International operates hotel-casino properties in the Bahamas, Atlantic City, Connecticut and the Indian Ocean. The Desert Inn would have been the company's first in Las Vegas, and many observers expected Kerzner to use the Desert Inn as a springboard for more ambitious expansion plans on the Strip.

Analysts say Starwood will have considerable difficulty finding a new buyer for the famed hotel-casino at a price near the $275 million Kerzner and Sun International were willing to pay.

"It'll be difficult, because you really need a strategic buyer who wants the Desert Inn and the strategic plot of land next door," said Dave Anders, gaming analyst with CS First Boston. "I don't know how many of those are out there.

"Given the decline in casino stock valuations since this deal was announced ... it may be a good bit more difficult (to sell)."

If the property is sold for less than Sun International had agreed to pay, Sun International has agreed to pay 50 percent of the difference, to a maximum of $15 million.