oyd's announcement came two days after bankrupt locals gaming giant Station Casinos reached an agreement with its unsecured creditors for support of the company's two-pronged Chapter 11 bankruptcy reorganization plan.
In a statement, Boyd Gaming Chief Executive Officer Keith Smith said the court-approved bidding process does not offer a level playing field. "Over the last 18 months, we have devoted significant resources in our attempt to acquire the ... assets of Station Casinos," Smith said in the statement. "Unfortunately, given bidding procedures that favor Station insiders, and our current view of the limited potential value of the operating and development assets, we have concluded this opportunity no longer makes sense for our company."
US Bankruptcy Judge Gregg Zive plans to administer an auction on Friday for 11 casinos - including Texas Station, Santa Fe Station and the two Fiestas - and certain land holdings and American Indian gaming contracts, which would be placed up for sale as one entity. Fertitta Gaming, a business formed by Station Casinos founders Frank Fertitta III and Lorenzo Fertitta, has the stalking horse bid of us$ 772 million.
One of the provisions cited by Smith was the a requirement known as the "Texas Station put," which would force an outside buyer to acquire the leased land under Texas Station for us$ 75 million. Fertitta Gaming would not need to pay that since the land is owned by Victoria Fertitta, the mother of Frank and Lorenzo Fertitta.
Smith said other provisions approved by the court would allow Station Casinos to transfer assets from the casinos before their sale, including customer lists and information technology infrastructure. Station Casinos would have the right to hire away any or all employees and executives of the casinos before their sale.
"Boyd Gaming remains committed to growth. However, we will only pursue transactions that are financially sound, fit well with our existing business, and offer attractive long-term returns for our shareholders," Smith said. "Clearly, this opportunity no longer meets these criteria."
Fertitta Gaming's bid is supported by Station Casinos' primary lenders, Deutsche Bank and JP Morgan, and real estate investor Colony Capital. The bid could include all or a portion of a us$ 100 million investment from the unsecured creditors.
During a court hearing two weeks ago, Station Casinos' advisers and attorneys said they were working to determine whether companies that submitted letters of intent to bid on the Station Casinos properties were qualified. Financial adviser Lazard Freres & Co. confirmed that bids other than the stalking horse bid were submitted. A firm representative wouldn't say how many offers were in place.
The other prong in Station Casinos' plan of reorganization is the spin-off of four Station Casinos properties - Red Rock Resort, Palace Station, Sunset Station and Boulder Station - along with the Wild Wild West and its adjoining 110 acres, into a new holding company owned by Colony Capital, Deutsche Bank, JP Morgan and Fertitta Gaming.
Last year, Boyd Gaming offered to pay us$ 950 million for 14 of the company's casinos. The offer was rejected and five months later Station Casinos filed for Chapter 11 bankruptcy, reporting approximately us$ 5.6 billion in debt.
Boyd Gaming tried to insert itself into the bankruptcy case in November by acquiring a portion of the company's unsecured debt. In December, Boyd Gaming offered to purchase all of Station Casinos for us$ 2.45 billion. The offer was rejected.
Boyd Gaming is in the process of refinancing its capital structure on the Borgata in Atlantic City, raising about us$ 800 million. Some analysts believe Boyd will attempt to buy out the 50 percent stake in the hotel-casino that is owned by MGM Resorts International.