Vegas timeshare developer agrees to be taken over

Jennifer Robison

Friday, Dec. 14, 2001 | 10:53 a.m.

Mego Financial Corp. of Las Vegas, a vacation timeshare company, Thursday announced a private stock placement with LC Acquisition Corp. that will give LC Acquisition control of Mego.

Jerome Cohen, president of Mego, said the transaction would give the company $5 million in fresh capital for future expansion.

"We've taken the company as far as we could without the introduction of important, additional capital," Cohen said.

Mego, which operates as Preferred Equities Corp. and Ramada Vacation Suites, also said Thursday that its board approved a new chief executive and president proposed by LC Acquisition.

Floyd Kephart will replace Cohen, who is also president and chief executive of Preferred Equities Corp., and Robert E. Nederlander, chief executive of Mego.

"The current management is selling out (its) interest, and it was thought to be appropriate...that we not wait until a favorable vote from shareholders for the transition to take place," Cohen said. "This company has a great future, and it needs additional capital. We happened to find that capital in a place where people are so interested that we thought it might mean great things for the company."

Kephart's appointment is on an interim basis, pending the approval of the placement by Mego's shareholders. Cohen said shareholders are scheduled to vote on the transaction in January or February.

Kephart, who said he expects his interim capacity to become permanent should the deal close, outlined long-term expansion plans for Mego.

"We'll expand our current core business, which is primarily in land sales and timeshares, into markets we're not currently in, and we also plan to expand our presence in the Nevada and Florida marketplaces."

The company, which operates its properties under the Ramada Vacation Suites name, has more than 48,000 timeshare interests and 70,000 owner households at nine resorts in Nevada, Colorado, Florida, Hawaii, Louisiana and New Jersey. The firm also owns land in Biloxi, Miss., and is selling off 60,000 acres of land in Nevada and Colorado.

Kephart said Mego would remain headquartered in Las Vegas; he said LC Acquisition had no plans to close down any Mego offices or cut back on any staff. Mego employs about 500 people in the Las Vegas area.

"I don't think you'll see any great changes," he said. "What you'll see is an improved operation in terms of new technologies we're applying to the operations. Most of what we do will be to build efficiencies and provide additional shareholder value to investors. That will come in terms of new development, new opportunities and operating in what we believe may be a more efficient manner."

Under the agreement's terms, Mego said it will privately place 750,000 common shares at $4 each with LC Acquisition.

Additionally, LC Acquisition agreed to purchase 1.3 million Mego common shares at $4 a share from certain Mego officers, directors and shareholders, and 500,000 shares at $4 each from broker dealer Balis, Lewittes and Coleman Inc.'s Doerge Capital Management unit.

This gives LC Acquisition about 2.55 million of Mego's shares, or more than 70 percent of Mego's approximately 3.5 million shares outstanding.

Shares of the company closed at $4.65, up 14 cents, or 3.1 percent, on Nasdaq volume of 1,800 shares. Average daily volume is 8,424 shares.

Kephart, whose experience is primarily in the real estate development industry, said New York-based LC Acquisition was established in fall 2000 to invest in and acquire travel and leisure companies.

Mego is the company's first acquisition.