LV execs to buy out PDS Gaming

Kevin Rademacher

Monday, Feb. 24, 2003 | 11:04 a.m.

The top management of PDS Gaming today announced a nearly $98 million plan to buy out the Las Vegas company.

PDS said today it agreed to the plan in which the managers would buy the 69 percent of the company's outstanding stock that they do not already own. The managers would pay $1.25 per share plus $1.50 in deferred cash payment rights for the 2.8 million shares they do not own.

The stock and rights portion of the deal is valued at $7.7 million. The transaction also includes the assumption of about $90 million in debt.

PDS stock closed Friday at 91 cents. It has traded in a range between 42 cents and $4.92 the past year. By mid-morning today, PDS shares were up nearly 75 percent to $1.59.

The company, which has 30 employees in Las Vegas and 45 in Reno, will retain its public reporting status until July 1, 2004, PDS said.

The majority of PDS's gaming business is in financing and leasing gaming equipment to operators nationwide. The firm bought Rocky's Sports Pub and Grill in Reno last year. Two years ago, the company called off an attempted purchase of the local PT's Pub chain.

The company also attempted to purchase the former Regent Hotel and the Four Queens in downtown Las Vegas.

PDS Chairman and CEO Johan P. Finley, who is buying the company with Chief Operating Officer Peter D. Cleary and Executive Vice President Lona M.B. Finley, said the stock market was not providing the company with the leverage it needed.

"Being public has not granted us the access to capital we wanted," he said. "As a public company you hope to use your stock as currency. We haven't done that."

As a private company, expectations will not change.

"We want to grow the company," Finley said.

Finley indicated that the new version of the company will be focused on financing and gaming equipment leasing deals, not forays into casino ownership.

"We attempted to do something with a diversification model," he said. "Those strategies did not work out."

As such, the company will return to its core business of financing. Finley said those deals are not as exciting as casino ownership deals, but "it's the making money thing that's very important to us."

In the third quarter of 2002, the last complete filing period for PDS, the company reported an operating profit of $24,000 on revenue of $7.3 million. That was well off the 2001 pace of $650,000 in net income on revenue of $11.5 million.

While the company turned a third-quarter profit, casino operations lost $66,000 on revenue of $42,000.

In today's statement, the company said its operations would remain unchanged following the ownership move, keeping all of its current employees and its local headquarters.

The trio of buyers must still receive formal approval of the company's independent directors, seek the consent of the company's lenders, secure financing and gain the approval of the state Gaming Control Board.

Finley said the company deals with 30 different gaming jurisdictions, but said the approval process for the deal should proceed smoothly.