Stratosphere rejects Icahn offer

Thursday, May 11, 2000 | 10:58 a.m.

Stratosphere Corp. said it rejected an offer by its controlling shareholder, financier Carl Icahn, to buy out the company's minority shareholders for $44.35 per share.

But the company indicated it's willing to talk about a buyout with Icahn at a higher price.

Icahn, who controls 89.6 percent of the stock of the company, offered to buy out the minority holders April 25 in an offer valuing the equity of the entire company at $90 million.

Stratosphere said Tuesday it transmitted the offer to its board of directors, which includes independent director Jerome Becker. Becker engaged independent counsel and an investment banking firm in order to gain a valuation for the company and its stock.

On May 2, Becker's counsel "wrote to Mr. Icahn and indicated that Mr. Icahn's offer did not form a basis for a transaction in view of the disparity between the valuation of the company using the offer price and the valuation range determined by the investment banker," Stratosphere said.

"However, counsel invited further discussion of the matter. .. possible further discussions may occur from time to time."

Separately, Stratosphere reported a first quarter profit of $1.6 million or 80 cents per share, down from $2.1 million or $1.04 per share in the year-earlier quarter. Revenues, however, increased slightly from $33.9 million to $34 million.

Hotel occupancy of 93 percent was up from 87 percent, though the average daily rate of $54 was down from $57 because of 10,000 new rooms available on the Las Vegas Strip due to the opening of four megaresorts in 1999.

Casino revenue of $14.2 million was up $500,000 from the year-ago quarter.

Hotel revenues averaged 18 percent of gross revenues during the first quarters of both 2000 and 1999.

Stratosphere management said it does not expect any growth in hotel occupancy or ADR over the next 12 months because of the 1999 room additions on the Strip and the opening of 2,500 rooms in the third quarter at the new Aladdin.

Stratosphere said its $65 million construction job to complete a 1,000-room hotel tower is under way and its completion "may be critical for the company to remain competitive in the long term."

The extra hotel rooms will help Stratosphere fill its casino and increase visitation to its landmark 1,149-foot observation tower.