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Updated: Maloof Sells Control of Palms to TPG/Leonard Green

By Chuckmonster on Wednesday, 15th June 2011 1:12am
  » filed under Mergers & Acquisitions  comments: 12


George Maloof has given up control of the Palms to Texas Pacific Group / Leonard Green in exchange for an investment which extinguishes approximately $400M in debt. Exact percentages of ownership are unknown, but the Maloof told the Wall Street Journal that the Maloof family's percentage will end up somewhere between 10-20% of the company, from 85%.

In the best case scenario, Maloof sold 66% of the company for $400M, which is a valuation of The Palms at just over $600M? Yikes. It was indeed just as painful as we suggested six months ago.

The official release calls the event a "recapitalization" which will "significantly reduce the amount of debt on the company's balance sheet and position the company for continued growth."

George Maloof's official statement:

We are excited to partner with Leonard Green and TPG, both leading private investment firms that will help the Company identify and execute on growth opportunities in our existing market of Las Vegas and beyond. While the last three years have been challenging for all Las Vegas operators, the Palms has been performing well and, with a stronger balance sheet, will be well positioned to undertake the initiatives that will continue to make it one of the foremost destinations in Las Vegas.

So Palms is performing well but they needed to call in some adults to clean up the balance sheet to take advantage of growth opportunities. Spin me once...

As of now (update #4 to this story) there is no word from any of the Caesars Entertainment goon squad, which might mean that this deal is completely independent. If not, I'm sure regulators are going to take a deep hard look at this.

Tagged: palms   caesars   


Comments & Discussion:

The big questions are:
What happened to the equity positions of the Maloofs, the Greenspuns and the Fertittas? (Was something like 86.5 percent, 6.75 percent and 6.75 percent, respectively.)
Presumably TPG & LG took equity positions. What are they?
Does George Maloof retain absolute operational control?
Is there a provision for the new investors assigning ownership/operational control to Caesars Entertainment (partially owned by TPG)?

"significantly reduce the amount of debt"

if debt is reduced, then TPG / Leonard Green must be getting equity right?

Per the Wall Street Journal's Alexandra Berzon after phoner with George Maloof:
"Mr. Maloof, chairman of the resort, said in an interview Tuesday that more than a year ago he courted Leonard Green and TPG to buy up Palms' debt, which originally was worth around $400 million. The casino worked out a deal with the firms to extend the loan after it came due last year, Mr. Maloof said.

Under the new plan, still subject to regulatory approvals, the Maloof family's stake in Palms will fall to between 10% and 20% from 85%, Mr. Maloof said. The Greenspun Corp. will maintain a small stake in the company, Mr. Maloof said."

Because TPG/LG bought its Palms debt at a discount it's really difficult to set a value on the property (the two casino towers, original Palms and second Fantasy) and the condo-hotel tower (which, I believe, still has a decent number of unsold units). Based on the WSJ story it appears that TPG and LG traded most of its $400 million in debt -- which it presumably paid MUCH less than $400 million for -- for somewhere between 65% and 75% of the property (from the Maloofs). According to the news stories my guess is that the new owners may or may not yet reach similar deals with the Greenspun family and with Station Casinos, which each owned about 6.75% stakes, giving up the rest of the debt (13%+, estimating) in exchange for most of the Station and Greenspun stakes (following the pattern of the Maloof deal).

I'm curious why Apollo isn't involved in this and Leonard Green is. It is getting difficult to keep all these shards of investment holding companies straight. Is this going to go into the Caesars borg?

Some folks in the industry around here assume that it is, but I've had no word from Caesars either way.

More importantly, here's a question I've had for a long time. If Caesars if the Borg, who is MGM? The Klingons? They are pretty expansionist and they kind of have an empire with a titular emperor right now.

Columbia Sussex would definitely be the Pakleds.

Who gets to be the Cardassians? The Romulans? The Horta? Species 8472?

I'd vote for MGM as Ferengis. (Can't you see it with Murren?) I think CET get's the Borg moniker based on them being everywhere in the US, even though they own less in Vegas.

So does this mean the Palms going to get Total Rewards?

It would make sense to add the Palms to Total Rewards, wouldnt it?

only 10-20% = they must have been facing foreclosure?

Make that 2%, like the milk:


They have an option to buy back up to an addition 18% (for a total of 20% ownership) via options and warrants.

The only way I see the Palms ever becoming part of the CET Collective is if they divest themselves of some properties in Las Vegas. The obvious choice is Rio, which has been the long-rumored piece of the empire to be sold. Could they potentially reduce the number of casinos they "own" by consolidating some of the properties under the same gaming license (For a number of years, Paris operated on the Bally's license and O'Sheas currently operates on the Flamingo's gaming license.)?

This foolio George Maloof nick named the (Don Magoof) needs to sell the Kings buy back shares snd warrants or re-enter the distributership business OR face saving move is restructure the Magoofs into minority owner status of the Kings but let's face it gellas the magoofs are a total embarrassment to BOTH Las Vegas AND the NBA PR wise not anyone's problem really but STILL dispensing with these numb nuts not a bad idea .

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