Station has new offers for its Missouri casinos

David Strow

Wednesday, Oct. 11, 2000 | 11:27 a.m.

Continued troubles in Missouri have apparently convinced Station Casinos Inc. of Las Vegas to entertain outside bids for its two Missouri riverboat properties.

Station today said it has received "several acquisition proposals containing substantially similar terms" as an agreement that Station already has with a group of its Missouri executives hoping to buy the casinos. Station has agreed to sell its riverboats in Kansas City and near St. Louis to the executives for $475 million.

But that agreement could be called off, Station said, if the group "does not meet certain key hurdles between now and the end of the calendar year." The company didn't specify what those hurdles might be, though it said it has amended the sale agreement to allow for sales to outside parties if the agreement is called off.

One of the biggest factors for Station, analysts say, may be friction between the Missouri Gaming Commission and Station Vice President of Finance William Warner, a member of the group hoping to buy the Missouri casinos. In August hearings, members of the commission's staff said it was unlikely they would recommend Warner for relicensing.

"When Bill Warner was (threatened with denial of) relicensing, it reopened the doors," said William Schmitt, gaming analyst for CIBC World Markets. "Station is a great story, but it's less of a great story if they can't get that capital out (of Missouri) and move it to Las Vegas. They want this transaction to happen, but the first swing at this is obviously with the management team."

One of the most likely bidders, Schmitt said, may be Argosy Gaming, which hopes to develop a new casino near St. Louis. Instead, the company may decide it's more cost effective to simply buy Station's property in nearby St. Charles, Schmitt said.

Schmitt also speculated that Isle of Capri and Mandalay Resort Group would be interested in making bids on the properties. Harrah's Entertainment Inc. could also be interested, he said, though such a deal would probably concern regulators because it would give Harrah's overwhelming market share in both cities.

"Kansas City is a great property with legs," Schmitt said. "St. Louis, with an investment of $70 million to $90 million, will be the category killer in that market. The assets really speak for themselves."

The announcement came a day after Station officials finally testified before the Missouri Gaming Commission on the activities of its former outside gaming attorney in Missouri, Michael Lazaroff. In testimony, the officials denied the company had benefitted from a personal relationship between Lazaroff and former commission Chairman Robert Wolfson.

"I know that Mr. Lazaroff and Mr. Wolfson were friends, and I know they would talk on occasion," said Glenn Christenson, chief financial officer of Station. "I don't remember anything specific about Station Casinos."

Lazaroff pleaded guilty in U.S. District Court at St. Louis to mail fraud and he was sentenced early this month to 30 days in jail and 90 days of home confinement. He testified at an earlier commission hearing in Kansas City.

Station president and CEO Frank J. Fertitta III had refused to testify at Tuesday's hearing, but changed his mind later in the day. Commission members threatened Fertitta with a $1 million fine if he continued his refusal to testify.

In an opening statement to the commission, Fertitta said the company had made one "mistake," which was hiring Lazaroff. Fertitta also said that bonuses Lazaroff had received were as a result of legitimate work he had done for the company.

Fertitta said that he felt "betrayed" by Lazaroff and characterized him as a "common thief and felon."

In response to several questions asking whether Christenson knew of any specific conversations or correspondence between Lazaroff and Wolfson related to Station, Christenson said "I don't recall."

Asked whether he was concerned that the two men might be violating state law by discussing casino-related issues, he said, "Those guys knew what the rules were."

Station general counsel Scott Nielson, who like Fertitta had refused to testify earlier in the day, told the commission that he was aware that Lazaroff had talked to Wolfson, but that it did not involve Station Casinos.

"I felt like they had not talked about things that were prohibited," under the law, Nielson said.

Fertitta and six other executives of the Las Vegas-based company had refused to appear after being subpoenaed for the hearing in Kansas City. That prompted the commission to vote to revoke Station's licenses in Kansas City and St. Charles, an action which is under appeal.

"We have determined at this point that the interests of the company, its employees and public shareholders are best served by showing that there is nothing to hide and by avoiding more litigation with the MGC," said Station attorney Charles German.