Casino suppliers merging

David Strow

Friday, April 12, 2002 | 11:11 a.m.

More than a year after they began merger talks, Paul-Son Gaming Corp. of Las Vegas and a French gaming equipment supplier announced Thursday they have reached a definitive merger agreement.

The value of the deal was not disclosed.

The pact will see privately held French company Etablissements Bourgogne et Grasset and its Las Vegas subsidiary, the Bud Jones Co. Inc., become subsidiaries of Las Vegas-based Paul-Son. However, it will be Bourgogne shareholders and executives, not the Endy family of Las Vegas, who control the merged company.

In exchange for their shares, Bourgogne's shareholders will receive 3.97 million new shares of Paul-Son stock -- a move that will increase Paul-Son's shares outstanding by 115 percent. The Paul S. Endy Jr. Living Trust -- currently Paul-Son's controlling shareholder -- will also sell an unspecified amount of shares to Bourgogne shareholders, giving Bourgogne's shareholders 63.6 percent control of Paul-Son. Bourgogne shareholders will control four of the company's seven board seats.

Paul-Son Chairman and Chief Executive Eric Endy will become an executive vice president and board member of the merged company. Paul-Son's new chairman will be Francois Carrette, Bourgogne's controlling shareholder, while its president and chief executive will be Gerard Charlier, Bourgogne's chairman and CEO.

Endy said in a statement that the company was "very enthusiastic" about the merger.

"We believe that the combined presence of Paul-Son and Bud Jones in the North American market and that of Bourgogne et Grasset in international markets will provide a powerful force on the casino table game supply industry," Endy said.

The merger will require the approval of gaming regulators and Paul-Son shareholders. A shareholder meeting should be held in the third or fourth quarter, the company said.

The merger could cost Paul-Son its position on the Nasdaq Stock Market. Since the deal has been designated a reverse merger, the combined company would be required to meet original listing criteria to stay on the Nasdaq SmallCap exchange. Paul-Son currently does not meet several of these requirements; its share price is below $4 per share, its public "float" has a value of less than $5 million, and its market capitalization is below $50 million.

Should the combined company fail to meet listing criteria, it would consider applying for listing on the Pacific Stock Exchange, based in San Francisco.

Bourgogne and Paul-Son began merger talks in February 2001, but were unable to come to a definitive agreement by an April 30 deadline. Paul-Son demanded a $1 million termination fee from Bourgogne, and Bourgogne made "unspecified claims" against Paul-Son.

The two sides entered into arbitration, but put these talks on hold and resumed merger negotiations in August.

Paul-Son is one of the largest suppliers of table game equipment, such as casino chips, cards, dice and game tables. Bourgogne sells similar products to the European and Far Eastern markets.

Paul-Son was founded by Paul Endy in 1963. His son, Eric Endy, assumed control of the company in 1998 after his father fell ill. Paul Endy died several months later, but his family controls the company through a trust.

Despite its leading position in the table game supply industry, Paul-Son has struggled with quarterly losses over the last two years. On Thursday Paul-Son reported a loss of $826,000, or 24 cents per share, for the quarter ended Feb. 28. That's an increase in the net loss of 230 percent over the year-ago quarter. Revenues fell 46 percent to $3.4 million.

Over the nine-month period ended Feb. 28, Paul-Son has lost $1.71 million, compared to a loss of $984,000. Its revenues over this period have declined 23 percent to $11.9 million.

Saying he was "obviously disappointed" with the declines, Endy blamed Sept. 11 and a lack of new casino openings and expansions.

Bourgogne, meanwhile, posted revenue of $23.4 million for all of 2001.

Paul-Son stock rose 25 cents to $1.35 this morning.