Golden Nugget parent company agrees to buyout deal

Landry’s Restaurants Tuesday reached a buyout deal with its top executive to take the parent company of the Golden Nugget private in a transaction valued at $1.2 billion including debt, the Houston-based company announced Tuesday.

Landry’s Restaurants Chairman and Chief Executive Officer Tilman Fertitta had his offer of $14.75 per share in cash accepted by the company’s board of directors, a 37 percent premium on Monday’s closing price of $10.76 per share.

Fertitta, who owns nearly 55.1 percent of the company’s stock, would acquire all shares of Landry’s that he does not own. The transaction is subject to Landry’s refinancing a portion of its $915.3 million debt load.

The buyout is subject to approval by the majority of Landry’s stockholders controlling the stock not held by Fertitta.

Bond analyst Barbara Cappaert of KDP Investment Advisors priced Fertitta’s out-of-pocket expense to acquire the stock he does not already own at $108 million.

She added that $437.1 million in debt coming due in 2011 needs to be addressed whether the company is bought by Fertitta or not.

“We have been down this road before,” Cappaert said in a note to investors. “Funding has always been an issue.”
The buyout agreement comes nearly three weeks before the downtown Golden Nugget opens its new $150 million, 500-room hotel tower.

If the expanded hotel-casino survives the economic downturn, the new Fertitta-owned company would benefit from higher valuations, Cappaert said.

But if the gaming property defaults on its separately held $495 million in term loans, Cappaert said Fertitta would still control a significant restaurant portfolio, much of which comes with significant real estate underlying the assets.

“Not a bad move for Mr. Fertitta,” Cappaert said in the investors note. “We think in either event that the buyout price is cheap” and shouldn’t affect the company’s debt ratings.

An initial offer of $21 per share fell apart in October 2008 after some of the company’s restaurants in Texas were heavily damaged by Hurricane Ike.

Fertitta made a second offer of $13.50 per share that was abandoned in January because of a reluctance to disclose certain details to the Securities and Exchange Commission.

In September, Fertitta told a special directors committee to begin go-private discussions that would have seen a subsidiary, Saltgrass Inc., spun off into a separate company. Landry’s shareholders would receive shares in the new company in exchange for shares of Landry’s.

That offer was rejected by Landry’s directors as being inadequate.

A special committee of the board can continue to solicit other buyout offers for the Houston-based company until Dec. 17, or until the debt refinancing is complete.

The transaction is expected to be completed in the first half of 2010 pending regulatory approval.

Landry’s is the nation’s second-largest operator of seafood restaurants behind Red Lobster owner Darden Restaurants Inc. The company also owns Charley’s Crab, Landry’s Seafood House and The Chart House. Its non-seafood restaurants include Vic & Anthony’s and the Pizza Oven.

The company also owns the Golden Nugget in Laughlin.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

The Associated Press contributed to this report.