Illinois-based investment fund Z Capital Partners has offered to buy regional casino operator Full House Resorts for $132.5 million in a cash and stock transaction.
In a filing with the Securities Exchange Commission Monday, Z Capital CEO James Zenni said Full House’s five casino-operation would be merged into Las Vegas-based Affinity Gaming, which Z Capital took private in 2017.
“Our proposal represents a unique and compelling opportunity to maximize value for stockholders and stakeholders in both companies,” Zenni said in a statement. Z Capital made the offer in a letter to Full House’s board of directors.
Z Capital is offering $1.79 per share for Full House, which closed Monday at $2.65 on the Nasdaq, down 9 cents or 3.28 percent.
In a September research note, Roth Capital Partners gaming analyst David Bain calculated Full House’s value at $3.80 per share but could be worth up to $4.50 per share.
“We believe Full House represents strong risk-reward investment at current levels,” Bain wrote.
In a statement Monday morning, Full House officials acknowledged receiving the letter and said the board would consider the “expression of interest in due course.” The company said the letter was the first time it became aware of Z Capital’s interest.
“The expression of interest reflects a price that is significantly below recent and past trading of (Full House) stock and well below most expectations for the value of the company,” Full House said.
In a note to investors Monday morning, Macquarie Securities gaming analyst Chad Beynon said there was no mention of potential cost savings through a merger.
“Given the uncertainty of the synergy potential as well as the stock/cash consideration, it becomes tough to determine whether the offer represents a good value,” Beynon said.
Z Capital said it would finance the transaction with debt financing from third party institutions and expects an answer by Oct. 29, or, “We reserve the right to take our proposal directly to the company’s shareholders.”
Affinity operates 11 casinos in four states – Nevada, Colorado, Missouri and Iowa. Las Vegas-based Full House’s casinos are in four states – Nevada, Mississippi, Indiana and Colorado.
Full House, which is headed by CEO Dan Lee, is in the process of expanding its Bronco Billy’s casino in Cripple Creek, Colorado, and recently made an offer to build a racetrack, casino, luxury hotel, and golf course complex near Clovis, New Mexico. The company is also exploring opportunities in Washington State.
Affinity named Former Tropicana Entertainment CEO Tony Rodio as the casino operator’s chief executive last week. Zenni said Rodio would oversee the combined operations.
“With an experienced and dedicated management team, Affinity would bring significant operational capabilities and expertise that we believe would further propel the combined company’s growth and unlock unrealized potential for Full House stockholders,” he said in a statement.
Lee, a former CFO for Mirage Resorts in the 1990s, led a group of shareholders in taking control of Full House in 2015. In Nevada, the company operates Stockman’s in Fallon and manages the Hyatt Regency in Lake Tahoe. The company also owns the Rising Star in Indiana and the Silver Slipper on the Mississippi Gulf Coast.
Zenni’s Z Capital took control of Affinity after a long effort to buyout the hedge funds that controlled the casino operator. Z Capital has more than $2.3 billion of regulatory assets under management.
Affinity has five casinos in Nevada – notably the three Primm resorts some 40 miles from Las Vegas at the California state line and the Silver Sevens, located just east of the Las Vegas Strip.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
