Pinnacle Chairman Says Aztar Used 'Sleazy' Negotiating Tactics
Shareholders attending Pinnacle Entertainment's annual meeting Wednesday didn't have much to say about the company's proposed $2.58 billion buyout of Aztar Corp. But company Chairman Dan Lee did. Lee told shareholders that Aztar's advisers acted in a "sleazy" manner as the price for buying the Tropicana's parent corporation rose significantly in the weeks after Pinnacle agreed to buy Aztar for $38 a share, or $2.1 billion, on March 13. Lee speculated that Aztar's advisers were using late negotiations with Pinnacle as a tool to try to get rival bidder Columbia Sussex Corp. to increase its bid for the Phoenix-based casino company.
"It seemed like they were shopping our bid with other companies," Lee said.
Pinnacle and Aztar agreed Friday to amend their merger agreement to $51 a share -- $47 in cash and $4 in Pinnacle stock -- and to significantly increase the break-up fee Aztar would have to pay Pinnacle should the deal collapse.
Lee said the break-up costs, $55.2 million in a termination fee and up to $25.8 million to cover the company's legal expenses, sweetened the deal for Pinnacle shareholders.
"We would not have amended the merger agreement without increasing the break-up fee," Lee said.
During the company's shareholder meeting at the Four Seasons, Lee initially said he didn't plan a long discussion on the proposed Aztar transaction, in which Pinnacle would acquire the Tropicana casinos in Las Vegas and Atlantic City and three smaller casinos in Laughlin, Indiana and Missouri.
Lee said the deal, which could close by the end of the year, would double the size of Pinnacle and give the company a national presence.
Lee wouldn't discuss plans for the Tropicana's 34-acre Las Vegas location, saying he didn't want to give rival bidders any details.
However, as Lee began to describe the events that led to last Friday's price increase, he couldn't contain his feelings.
Aztar's board of directors, he said, had a duty to their shareholders to look at any solid offer that might have been better than Pinnacle's original signed deal. However, he said, some of the 14 bids that were floated in the past eight weeks were never really bids.
Colony Capital, owner of the Las Vegas Hilton, never made a formal offer of $41 a share for Aztar, Lee said. Others, such as rival regional casino operator Ameristar Casinos and Kentucky-based Columbia Sussex, which owns four Nevada casinos, made formal bids for Aztar only after speculating publicly that they might bid.
Ameristar dropped out of the bidding last week, while Pinnacle's latest agreement trumped Columbia Sussex's $50 a share offer.
"It was a frustrating process," Lee said. "We've probably spent more time in Aztar's properties in the last few weeks than Aztar's management has in the last few months."
A spokesman for Aztar could not be reached for comment. In the past, Aztar has declined to comment on all negotiations surrounding its possible sale.
Columbia Sussex and Pinnacle have a history. Pinnacle attempted to buy the bankrupt President Casino in St. Louis a few years ago, only to be outbid at the last minute by Columbia Sussex. However, Columbia Sussex let the President Casino fall back into bankruptcy last year after the company ran into problems with Missouri gaming regulators.
Pinnacle, which is spending $800 million to build two casinos in St. Louis, is expected to buy the President Casino next month in bankruptcy court.
"(Columbia Sussex) either stepped out of the deal for financial reasons or couldn't get licensed," Lee said.
A spokesman for Columbia Sussex declined to comment.