Pinnacle Entertainment and Atlantic Coast Entertainment Holdings have signed a definitive agreement under which Pinnacle agreed to purchase the entities that own The Sands and Traymore sites in Atlantic City, from entities affiliated with financier Carl Icahn.
Pinnacle will pay approximately USD 250 million, plus an additional USD 20 million for certain tax-related benefits and additional real estate. Together, the land being acquired comprises approximately 7,200 hectares at the heart of Atlantic City, with extensive frontage along the Boardwalk, Pacific Avenue and Brighton Park. The firm plans to design and build an entirely new casino hotel on the site, which would be among the largest and most spectacular resorts in the region.
As part of the agreement, Pinnacle required that the sellers proceed to close the existing hotel-casino, which is anticipated to occur within approximately 70 days of the signing of the agreement. The closure will facilitate the construction of a new, much larger facility as quickly as possible. The 26-year-old Sands, which was one of the first gaming resorts to open in Atlantic City, is one of the city’s smallest properties.
„Atlantic City is one of the top US gaming destinations, and we’re looking forward to being a part of the world-famous Boardwalk,“ said Daniel R. Lee, Pinnacle’s Chairman and CEO. „This major new resort will be a key component in our plan to build a national network of gaming properties. It will also help extend our development pipeline and our company’s growth through 2010 and beyond.”
Under Federal law, employees soon will receive 60 days’ notice of the expected closing. Among its provisions for employees, the agreement provides for severance benefits in accordance with union agreements, as well as severance pay for nonunion employees who stay through the 60-day closing period.
Icahn has seen to it that ACE Hi, the parent company of The Sands, although not legally required, will fund an additional one week of severance for eligible employees for each year of service over two years. In addition, through his negotiations with Pinnacle, it has agreed that full-time employees who have been with The Sands for at least six months will be eligible for two weeks’ severance funded by Pinnacle. Pinnacle also has agreed to provide outplacement services to all Sands employees, and those willing to relocate will be considered for positions at other properties operated by Pinnacle or Icahn.
The transaction is subject to the satisfaction of customary closing conditions and it is not subject to financing. The majority stockholder of ACE Hi, AREP Sands Holding, LLC, which owns approximately 58% of the outstanding stock of ACE Hi, has delivered a stockholder written consent approving the sale of The Sands. AREP Sands is a wholly-owned subsidiary of American Real Estate Holdings Limited Partnership.
If within such 45-day period, the ACE Hi board determines that an alternative proposal is more favorable to the ACE Hi stockholders, it is permitted to terminate the acquisition agreement with Pinnacle upon payment of a us$ 10 million termination fee. In addition, entities affiliated with Icahn, including AREH and AREP Sands, have agreed to pay to Pinnacle all of any additional value received by such entities through an overbid. Pinnacle expects to close its purchase of The Sands/Traymore site by the end of the year.