Lyle Berman Strikes Gold

Lyle Berman Strikes Gold: Golden Entertainment to Buy Stratosphere, Arizona Charlie’s

The 2017 World Series of Poker is in full swing at the Rio All Suite Hotel and Casino in Las Vegas, where thousands upon thousands of poker players are hoping to hit their flops hard on the way to poker stardom and increased wealth. One legendary poker player, though, struck it rich this week without even needing any hole cards. When Golden Entertainment, Inc. announced that it will be buying American Casino & Entertainment Properties LLC (ACEP), Poker Hall of Famer Lyle Berman – who owns a minority share of Golden – saw his net worth increase by a few million dollars.

Golden Entertainment, formerly Lakes Entertainment, Inc., isn’t a household name in gambling. It owns a few casinos – the Pahrump Nugget Hotel & Casino, Gold Town Casino, Lakeside Casino and RV Park, and the Rocky Gap Resort – but none are particularly known to anyone besides locals. The company it is acquiring, though, owns a Las Vegas landmark, the Stratosphere Casino, Hotel & Tower on the north end of the Las Vegas Strip. ACEP also owns popular casinos for locals, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, as well as the Aquarius Casino Resort in Laughlin.

According to the press release issued by Golden, the purchase price for ACEP is $781 million in cash plus approximately four million shares of Golden stock (NASDAQ:GDEN). Using the ten-day weighted average price on June 9th of $17.05 per share as referenced in the press release, that would make the stock portion worth $68.2 million and therefore value the entire package at $849.2 million.

Golden Chairman and CEO Blake L. Sartini said of the deal:

This is a transformational event for our Company, creating a significant gaming portfolio centered around Nevada-based casinos that, in addition to our Pahrump properties, will include two well-known Las Vegas locals casinos, a destination resort in Laughlin, and the iconic Stratosphere property on the Las Vegas Strip. Our market leading distributed gaming businesses in Nevada and Montana, as well as our Casino Resort in Maryland, present several opportunities to cross-market and promote these new assets that we welcome to the Golden family. As with our existing businesses, we believe the American properties are poised to benefit tremendously from anticipated continued economic growth in Nevada, particularly from the continued strength in the Las Vegas market.

As for Lyle Berman, he is the former Chairman of the Board and CEO of Lakes Entertainment, before it merged with Sartini Gaming, which is the parent of the Golden Gaming Group. According to recent financial statements, Berman holds 1,657,841 shares of Golden Entertainment stock. There are 22.5 million shares of Golden stock outstanding, so Berman owns about 7.4 percent of the company.

Golden shares closed at $20 on Monday, the day of the acquisition announcement, a $3.07 increase (18.1 percent) from the previous day’s close. Thus, on Monday, Lyle Berman made $5,089,572. The stock has pushed up very slightly since, adding another 18 cents.

The 75-year-old Berman has won three World Series of Poker gold bracelets, the last coming in $5,000 No Limit Deuce to Seven Draw in 1994. He has about $2.7 million in live tournament earnings. Berman is better known in poker circles, though, for being a fantastic high-stakes cash game player. He was inducted into the Poker Hall of Fame in 2002 along with Johnny Chan.

Sartini touched on some of the strategy behind the acquisition in the press release, saying:

The American properties represent an ideal complement to our existing operations as they strengthen our presence in the Las Vegas locals market while providing us with an iconic destination property on the Las Vegas Strip. Our proven strategy of focusing on guest service, quality food and beverage offerings and effective player marketing will complement the strong existing operations currently at all of American’s properties. In addition, given the recent investment activity focused on the north end of the Las Vegas Strip, we see future potential to develop the approximately 15 acres of excess real estate surrounding the Stratosphere. This acquisition supports our goals for growth in many ways, including the potential to use our increased free cash flow and financial scale to pursue distributed gaming opportunities in existing or potential new markets.

John DeCree, a gaming analyst with Union Gaming, told the Las Vegas Sun that the acquisition is a good move strategically for Golden.

“Golden’s core competency is already the Las Vegas locals through its distributed gaming slot machines and taverns,” said DeCree.

“We’re seeing a continued consolidation across all regional gaming,” DeCree added. “That’s just driven by the efficiencies of scale and synergies it produces. The more properties you can own and greater scales you have, the better and more efficient it is.”

The deal between Golden Entertainment and American Casino & Entertainment Properties is expected to close by the end of the calendar year.


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