Friday, Feb. 15, 2002 | 11:07 a.m.
Station Casinos Inc. of Las Vegas today announced it plans to team up with casino developer Sol Kerzner of South Africa in the Internet gambling business.
Station said this morning it will pay $5 million to acquire a 50 percent stake in SunOnline Ltd., the online gambling business of Kerzner's Sun International Hotels Ltd. SunOnline holds one of three online gaming licenses issued last September by the Isle of Man, a British dependency located between the United Kingdom and Ireland.
If approved by Isle of Man regulators, the sale is expected to close by the third quarter of this year.
Las Vegas-based MGM MIRAGE also won one of those licenses, and plans to launch an online casino based on the Isle of Man sometime this year. But Station will be buying into an operating Internet casino, as Sun launched its online gambling site in December.
"We have been interested in the Internet space for some time ... rather than reinventing the wheel, this opportunity with Sun International is a way for us to leapfrog our competitors," said Glenn Christenson, chief financial officer for Station.
Sun's first online casino is branded after Atlantis, its luxury casino resort in the Bahamas.
Investor response to the announcement was muted; Station's stock rose 15 cents to $13.04 this morning.
It is an unusual partnership -- one is an operator of international luxury resorts, the other a specialist in the Las Vegas locals' casino business, with eight Las Vegas Valley properties. Both companies, however, say brands aren't what Station is bringing to the table.
"They understand competitive slots," said Omar Palacios, spokesman for Sun. "When you think about what online wagering will be ... there are certain characteristics of slot customers that will be in common with online customers. It enhances our efforts in this new and exciting space."
In addition, Christenson said, "the senior management of both companies have known each other for some time."
"That certainly assisted in the transaction," he said.
Station also has valuable technology that could, potentially, be used at the Isle of Man casino. Through a subsidiary called "GameCast," Station has technology that allows players to play slot machines located at a separate location. Rather than a software version of a slot machine or video poker game, a player using GameCast would see a video image of an actual slot machine.
The company is also exploring expanding the concept into table games, where players could play and bet online with a live blackjack dealer.
So far, Station has explored the idea for use in a system that could only be used within a single hotel-casino or cruise ship. But Christenson said it could also be used by the Sun-Station Internet casino.
"It's something, as a partnership, we'll explore," Christenson said. "One advantage is the credibility factor. People know they're playing a game manufactured by a recognized company, and operated by licensed, well-known gaming companies."
Ironically, Station will have to bar its primary customers from playing at the site. Both Sun and MGM MIRAGE draw a good deal of business from international customers, but the vast majority of Station's business comes from residents of Clark County.
But Internet gambling is currently illegal under Nevada law, and the Department of Justice asserts it is illegal under U.S. law as well. In any case, a Nevada licensee that accepted bets from U.S. customers at its online casino would jeopardize its gaming licenses here.
"We've done a lot of due diligence, and I can assure you that both companies have at the top of their list (keeping American customers out)," Christenson said. "The business can't be big enough to risk alienating or angering regulators in our respective jurisdictions."
Sun bars U.S. players from betting on its online casino, Palacios said, as well as customers from any other country where Internet gambling is illegal.
"The technology we have (to screen out American players) is leading edge, and it's working at this point," Palacios said. "We're confident we will adhere to those strict standards."
Not accepting American bets will limit the financial potential of the online casino, at least in the near term, Christenson said.
"But if it is legalized in the United States, we feel we'll be well positioned to take advantage of that, and be a first mover in that space," Christenson said.
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