Colony Capital is leading a management buyout of Las Vegas-based gaming company Station Casinos in a transaction valued at $8.8 billion (€6.8 billion), the latest example of growing private equity interest in the gambling industry.
Colony is teaming up with the two brothers at the helm of Station: Frank Fertitta III, the company’s the chairman and chief executive officer, and Lorenzo Fertitta, its vice chairman and president. The Fertitta brothers, who also own the Ultimate Fighting Championship brand, have built Station into the fifth-largest gaming company in the US. The company is most well known for its Las Vegas-area casinos, including the recently opened Red Rock Casino Resort Spa, which reportedly cost $1 billion, more per room than any casino in Las Vegas. The company also owns significant parcels of undeveloped land in the region.
Under the terms of the deal, Colony’s acquisition vehicle, known as Fertitta Colony Partners, will offer $90 per share for the company, an increase of approximately 10 percent from FCP’s initial offer of $82 per share, which it announced at the beginning of December. Included in the FCP consortium are Delise and Blake Sartini, the Fertitta’s sister and brother-in-law, respectively. Together the four insiders control approximately 25 percent of the company’s stock.
The board of the company may solicit third-party offers for the next 30 days. If Colony’s deal does not go through, FCP is entitled to a breakup fee of $160 million.
Colony has long been an active investor in the gaming sector, beginning with its acquisition of Harvey’s Casino Resorts in the late 1990s. Since then, the firm has made six investments in the industry, including the Las Vegas Hilton in 2003 and Kerzner International in 2006, which it purchased for $3.6 billion alongside Providence Equity Partners, Goldman Sachs, Isthimar and the Related Companies.
Private equity interest in the gaming sector has picked up pace in recent years as gambling proliferates across the country and investors are able to monetize valuable real estate opportunities. In December, Texas Pacific Group and Apollo Management agreed to a $17 billion transaction with Harrah’s, the largest gaming company in the US. Earlier this month, DLJ Merchant Banking Partners completed its acquisition of the Hard Rock Hotel and Casino in Las Vegas, a transaction valued at $770 million.