As predicted in this prior post, Houston-based Landry’s Restaurants Inc. announced yesterday that it is buying the Golden Nugget hotel-casino in downtown Las Vegas. The acquisition comes on the heels of a Landry’s junk bond offering last year amid speculation that the company was finalizing a strategy to attempt to add the potentially lucrative — but highly competitive — gambling business into its casual restaurant business.
Built almost 60 years ago, the Golden Nugget is the largest and probably the best of the 14 casinos in the troubled downtown area of Las Vegas, which has faded in recent years as numerous mega-casinos have been built in the Strip area of Vegas. The Nugget has just over 1,900 hotel rooms and employs over 2,500 employees.
Landry’s will pay Poster Financial Group Inc., the owners of the Golden Nugget, almost $300 million for the casino, including $140 million in cash and the assumption of approximately $155 million in debt.
Nevertheless, Landry’s may be picking up a bargain. Timothy Poster and Thomas Breitling — who were the founders of travel Web site Travelscape.com (later sold to Expedia) — are the owners of Poster Financial Group, which bought the Golden Nugget properties in downtown Vegas and Laughlin, Nevada from MGM Mirage Inc. in mid-2003 for $215 million. Poster Financial later later sold the Laughlin property for $31 million, but their operation of the Golden Nugget Las Vegas has not gone smoothly, as their dubious strategy of catering to high rollers resulted in a substantial drop in the casino’s “cash flow,” as the Vegas types say. Messrs. Poster and Breitling also decided to take part in the Fox reality television show, “The Casino,” which turned out to be a real turkey and was not good public relations for the casino. In short, it appears that Messrs. Poster and Breitling have had their fill of the gaming business for the time being.
The market responded favorably to the announcement, as Landry’s shares were up 12% to $31.95 on volume of 2.5 million shares yesterday afternoon on the New York Stock Exchange. Average daily volume in Landry’s shares is normally a tad over 300,000 shares.
Landry ‘s is a national restaurant company that owns and operates 300 restaurants, including Joe’s Crab Shack, Rainforest Cafe and Landry’s Seafood House. Landry’s CEO Tilman Fertitta, who founded the company and controls about a quarter of the company’s outstanding stock, is the cousin of the Fertitta family that runs Station Casinos Inc. Landry’s had about $1.1 billion in revenue during its most recently audited fiscal year and currently employs more than 30,000 people.