There’s no longer any pretense whatsoever that Boyd Gaming‘s takeover offer for Station Casinos is being pitched to Station management. In its reply to Station CEO Frank Fertitta III‘s trash-talking refusal of Boyd’s offer, the latter posits that “the proposal outlined in its February 23, 2009 letter offers a superior recovery to creditors when compared to the current restructuring offer Station has proposed.”
Boyd’s target audience, the Station bondholders, find themselves in the catbird seat. Even if they don’t like the color of Boyd’s money, the onus is on gambling’s best-paid CEO to come up with something better. Responding to Fertitta’s jab at Boyd’s financial status, the company “reiterates that it has sufficient liquidity under its credit facility to finance a cash transaction, and contemplates that no amendment to its credit facility would be required under the proposed transaction structure.”
Translation: There’s as much as $2 billion on the table for you … but not a penny more. Whether or not it’s prudent for Boyd to be pushing all its chips into a Station bid (as opposed to finishing Echelon), putting a hard cap on the deal is a wise move, signaling that the company won’t be drawn into more than a finite bidding war.
Frank Fertitta III: superfluous?
In Boyd’s defense, while Station’s cash flow hasn’t been what management cracked it up to be, it would still provide Boyd with a means of paying down the acquisition from Day One. In addition to reducing the potential leverage ratio, Boyd would get an immediate return on its $2 billion — something that can’t be said for the project that has been dubbed “Inch-along.” Boyd can also make the argument that those returns will look even better once it starts making economies of scale and eliminating redundancies … starting with the Fertitta brothers and working downward.
Oh … and if you’re wondering who’d get the “Station” name (and the brand equity attendant thereupon), I’m told the answer is: Nobody knows. At least not yet.
