Riviera shareholders nix Sternlicht-led buyout

Influential shareholders opposed the buyout saying the $211m price tag undervalued the company.

Shareholders of casino operator Riviera Holdings yesterday rejected a $211 million (€164 million) buyout bid from Riv Acquisition Holdings, which is led by Starwood Capital chief executive officer Barry Sternlicht and Las Vegas developer Brett Torino. Some large shareholders, including DE Shaw, said the offer underestimated the value of the land under the company’s Las Vegas Strip property.

Riviera, which owns and operates the Rivieria Hotel and Casino on the Las Vegas Strip and the Riviera Black Hawk Casino in Black Hawk, Colorado, received a competing offer of $249 million from International Gaming & Entertainment, an affiliate of Boston-based merchant equity fund BT Enterprises, earlier this month. The company proceeded with the shareholder vote because it didn’t have enough information to evaluate International Gaming’s offer.

“We regret that the holders of the required 60 percent of our outstanding shares did not vote in favor of the merger as our board of directors recommended,” said Riviera CEO William Westerman in a statement. “Our management and team members will continue to dedicate their efforts to maximize shareholder value.”

Riv Acquisitions offered $17 per share for the company and is reportedly unlikely to raise its bid. The $20 per share offer from International Gaming remains on the table.

“We felt and still feel that $17 was full value,” Riv Acquisitions president Scott Butera told the Associated Press. “We’re not changing out position on that.”

Riv Acquisition also has ties to Chicago developer and Walton Street Capital principal Neil Bluhm and Paul C. Kanavos, CEO of Flag Luxury Properties, which holds a portfolio of luxury hotels including some Ritz-Carlton properties. The acquisition group is entitled to a $7.9 million breakup fee if Riviera is sold to another party within a year.

Starwood Capital’s most recent vehicles include the $1.5 billion Starwood Global Opportunity Fund VII and the $900 million Starwood Hospitality Fund I. Both funds closed in late 2005.