Mystery bid lurking in MTR talks |

Mystery bid lurking in MTR talks

Rob Sabo

Eldorado HoldCo LLC’s announcement last week that it had upped the terms of its merger offer with MTR Gaming Group, combined with Jacobs Entertainment’s announcement it would not pursue an alternate merger deal, seems to clear the way for a merger between MTR and Reno-based Eldorado.

Seems to, that is.

In a quarterly filing with the Securities and Exchange Commission a few days ago, MTR Gaming Group refers to a third party that also submitted an unsolicited bid in late October to acquire MTR, which operates racetracks, casinos and hotels in West Virginia, Pennsylvania and Ohio. The unnamed buyer — referred to as “Company Z,” in MTR’s SEC filing — offered $5.25 to $5.50 per share of MTR Gaming’s common stock and had no financial restrictions on raising the money for the acquisition.

Eldorado last week increased its offer to MTR Gaming to $6.05 per share and appears to have a green light for approval from MTR’s board of directors. Eldorado HoldCo’s previous offer was for $5.15 per share, which prompted a competing offer from Jacobs Entertainment for $5.69 per share. Jacobs, which owns and operates the Gold Dust West properties in Reno, Carson City and Elko, is a minority shareholder in MTR.

Jeffrey Jacobs, head of the Golden, Colo.-based company, said last week that he supports the new Eldorado bid at $6.05 per share and that Jacobs would vote its shares of MTR in favor of the amended agreement.

“Although the initial Eldorado-MTR merger agreement did provide some of the benefits I feel are important for MTR’s survival, $5.15 per share did not offer sufficient shareholder value,” Jacobs said in a statement. “The amended agreement that increases both the price per share and the percentage of the value offered in cash achieves my desired goals. It provides all of the benefits of increased financial scale, geographic diversification, improved credit profile and potential multiple expansion, but does so at a price that maximizes shareholder value.”

Under the merger agreement, the two firms would merge into a new company, Eldorado Resorts, Inc., and the new firm’s shares would trade on the Nasdaq stock market. MTR Gaming’s shares last week were trading at $5.63 on the Nasdaq.

Executives with Eldorado Resorts and MTR Gaming didn’t respond to inquiries as to the status of Company Z’s offer or whether the unnamed buyer had increased its offer in light of Eldorado’s sweetened bid. MTR Gaming said in its SEC filing that its board of directors has requested that Company Z provide additional information regarding its proposal so that it can analyze the proposal and make a determination of its value and financial strength to the company’s shareholders.

So far, however, MTR’s board hasn’t changed its unanimous recommendation to vote for the proposed merger with Eldorado, it says in its SEC filing. That could change if Company Z’s counter offer brings more value to MTR Gaming Group’s stockholders, the company says.

MTR Gaming hasn’t set a timetable to complete its review and evaluation of Company Z, and its silence on the matter might suggest the alternate proposal doesn’t represent any increased value. If MTR’s board does change its recommendation though, Eldorado Resorts would have the right to terminate its merger agreement and would receive a $6 million breakup fee.

MTR Gaming owns and operates the Mountaineer Casino, Racetrack & Resort in Chester, W. Va., where it’s headquartered. It also owns the Presque Isle Downs & Casino in Erie, Penn., and Scioto Downs in Columbus, Ohio. Scioto Downs also operates, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of, an affiliate of Churchill Downs Inc. Eldorado Resorts owns and operates gaming properties in downtown Reno and Louisiana and is a 50-50 joint venture owner with MGM Resorts International at the Silver Legacy.

Eldorado Resorts LLC reported operating income $5.2 million on gross revenues of $75 million in the quarter ended Sept. 30. This compares to operating income of $6.8 million on gross revenues of $76.8 million in the third quarter of 2012. Income for the quarter was impacted by a $1.4 million charge incurred in connection with the proposed merger with MTR Gaming Group.


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