Illinois investment group raises offer for Affinity Gaming

Illinois-based investment group Z Capital, which has twice failed to acquire casino operator Affinity Gaming, has made another cash offer to purchase the Las Vegas-based company.

In a letter filed Monday with the Securities and Exchange Commission, Z Capital CEO James Zenni said he would pay $11.50 per share to acquire all outstanding shares in Affinity, which operates 11 casinos in four states, including the off-Strip Silver Sevens and the three Primm Resorts.

Z Capital already controls 40.5 percent of Affinity, which is not publicly traded but has publicly held debt.

Affinity turned down an offer of $9.75 per share in May from Z Capital, saying the price “significantly undervalues” the company. Affinity’s board put together a special committee to evaluate the offer and other strategic alternatives.

Zenni made a similar offer two years ago to buy Affinity. He was appointed to the board in 2014 after a lengthy legal skirmish with the previous board.

Zenni said Z Capital filed a draft merger agreement which allows the board 30 days to find any offers superior to the Z Capital bid.

“We believe our proposal provides maximum value and an opportunity to market test the transaction to fulfill the fiduciary duties of the company’s board of directors to Affinity Gaming’s stockholders,” Zenni said.

“Absent a transaction of the type we are now proposing, we do not think there is any opportunity for Affinity Gaming’s stockholders to see meaningful appreciation in their equity value or to realize that value in the foreseeable future,” Zenni wrote.

Zenni said the transaction would be financed by equity capital from funds managed and advised by Z Capital, as well as debt financing from sources with which the investment group has a long-standing relationship.

Richard Parisi, a senior analyst for Silver Point Capital, is Affinity’s chairman. Silver Point is Affinity’s second-largest shareholder with 25.1 percent.

Affinity Gaming appointed Michael Silberling as CEO last summer. The company experienced a nearly 1 percent increase in the revenue in the first quarter and saw its cash flow jump more than 30 percent.

In addition to Nevada, Affinity owns casinos in Colorado, Iowa and Missouri. The company was created in 2010 after the bankruptcy reorganization of Herbst Gaming.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Find @howardstutz on Twitter.