Casino news source: Las Vegas Business Press - http://www.lvbusinesspress.com
Hooters sale called 'curious'
BY MATT WARD
Richard Langlois arguably had the best job in Las Vegas.
In late 2005 and early 2006, the longtime hospitality professional was the point man for Las Vegas' newest attraction. He was the public face who was upbeat about putting the final touches on a rollout to end all rollouts -- the opening of the Hooters Hotel Casino.
His days were filled with screening the hundreds of beautiful women looking for work as the ultimate Hooter girls, putting the final touches on the property's extensive marketing program and building hype for the celebrity-studded grand opening.
One year later, Langlois is gone. He works today for Reno's Grand Sierra Resort. Hooters, meanwhile, is up for sale in an insider deal that has at least one gaming analyst scratching her head.
Hooters' owners, 155 East Tropicana LLC, signed a letter of intent last week to be acquired for $95 million cash and $130 million in publicly traded debt. The intended buyers are NTH Advisory Group and Silverleaf Real Estate Development & Investments.
According to the initial letter of intent, NTH had an "unnamed partner." Silverleaf, according to a statement it released Jan. 19, is that partner. A call to either company could not confirm whether Silverleaf was the only unnamed partner. The two companies, coincidentally, are also developing a Hooters-themed casino in West Wendover, Nev.
Hooters President Michael Hessling says the NTH bid was an unsolicited offer. If the sale goes through, investors would see a nice return, he added. If not, he still sees no problems. "If the sale goes through, that's great," he said. "If not, that's great, too," Hessling said.
AN OLD FRIEND
Buyer NTH is owned by Richard Bosworth, a casino and hospitality developer who has very close ties to Hooters. He essentially introduced the owners of the old Hotel San Remo, Hooters' former incarnation, to the franchise and license holders from the popular, cleavage-themed restaurant chain, back in 2004.
According to Bosworth's official biography, he was instrumental in getting the Hooters deal done in the first place. Bosworth, it reads, has been involved with everything from site selection and coordinating loan documents to assisting with design elements, and providing a "significant portion of the pre-opening operational preparation."
Hessling says Bosworth has worked closely with his own company, EW Common LLC, for years and served as a "consultant" on the Hooters augmentation.
Despite what may appear a clean-cut, if very preliminary offer, some analysts say the deal appears very "curious" given the less-than-stellar performance of Hooters, the less-than-candid nature of the letter of intent, the lack of a proxy statement and no financing commitment, as is typical of second-tier buyouts of this nature.
"The market's not convinced it's a done deal," comments KDP gaming analyst Barbara Cappaert, who submitted some of the first and only in-depth market research about the sale. For example, nowhere in Securities & Exchange Commission records is Silverleaf mentioned as a partner with NTH. Cappaert says investors would want to know as soon as possible whether any capital is backing the deal.
"Why not have that already disclosed? It would show a lot more muscle with someone who has capital," she said. "It's very curious."
BUSINESS BIGGER ... BUT NOT BIG ENOUGH?
Another salient aspect of the deal is its size. "If the deal numbers were smaller, I would think it would be a pass to put the property in play," Cappaert said, referring to maneuvers meant to let investors know that a property is for sale.
"The valuations don't add up," she said. "It's curious, given what cash flow returns have been." Cappaert added that Hooter's first-year earnings are "nowhere near first-year expectations," although the unaudited 2006 numbers are more than double the property's cash flow the previous year, when it was still under the San Remo banner.
Cappaert discounted a straight land deal as being valuable enough to justify the offer. Hooters sits on only seven acres across from the MGM Grand, next to the Tropicana and just a half-block east of the Strip. It owns another two acres across a small side street.
Hessling said analysts are entitled to their opinions. "You are hardly going to find a casino that's open for one year and knocks the cover off the ball," he said.
As far as unnamed partners go, Hessling said they will be revealed as negotiations move forward. March 13 is the date for both sides to either agree or walk away and NTH has until Feb. 12 to deposit $1.1 million into an escrow account.
Meanwhile, Hooters is still evolving. It is not the property that Langlois touted as the mecca for the ultimate demographic: men from age 25 to 55. At least it hasn't performed as such, he says.
"It was a brand-new product. We all wanted it to be something maybe Hooters isn't. Hooters is what it is," he said. "There might be some confusion out there about what it is."
For example, Langlois said -- and Hessling confirmed -- that the property's revamped marketing strategy is to build greater appeal among older female slot players, a strong departure from the initial image cultivated by marketing executives.
"We've had to make some adjustments." Hessling said. But, he added, "we always felt the property was going to be successful."
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