Advanced Forum Search -- Advanced Casino Search

Big profits fuel casino power struggle
Message was posted: 09:15 Aug 22nd, 2006

User: beerstein Rank: Casino Gold: 1727CG Contributor rating: 3560 Status: Offline

Casino news from http://www.indystar.com/ It's no wonder Cook Group and Lauth Property Group are grappling for sole control of their casino-resort project in French Lick. Next year, the casino alone is forecast to generate $120.6 million in gambling revenue and send $30 million or more in tax revenue to state and local governments. By 2011, gambling revenue would grow to $136 million, according to figures released by the Indiana Gaming Commission. The numbers come from a forecast made for the companies by The Innovation Group, a national casino consulting firm, in November 2005. "We believe we can make this project very, very successful," said Vernon Back, Lauth's general counsel. On that point, Lauth and Cook agree. The question is how successful. In June the companies' divergent answers led Lauth to offer Cook $200 million for its half of the project and Cook to offer Lauth $5 million for its stake. Lauth officials expect the casino-resort to create cash flow of about $70 million a year. But Cook officials say industry norms would put the figure at $40 million to $45 million a year. Cash flow, which is a business' profits before it pays debt interest, taxes, depreciation and amortization, is a key figure to determine the overall value of a business. Casinos recently have sold at prices that are 8.5 to 9.1 times higher than annual cash flow, both Cook and Lauth say. So by Lauth's estimation, the casino-resort is worth about $620 million. But by Cook's math, it's worth $340 million to $410 million. Both values must be reduced by the $270 million the partners owe to bondholders. And subtract somewhere from $50 million to $62 million for the money Cook spent to buy the West Baden Springs and French Lick Springs hotels. By Lauth's math, it should pay Cook $150 million for its share, plus the money for the hotels, for a total of at least $200 million. In Cook's view, Lauth's stake is worth at most $45 million and as little as $4 million.