Cosmopolitan developer makes bid for Riviera

Beating rival bidders by USD 3 a share, real estate developer Ian Bruce Eichner (in partnership with Dune Capital Management) offered to pay USD 30 a share for Riviera Holdings Corp. The latter is owner of the Riviera Hotel & Casino in Las Vegas and the Riviera Black Hawk in Colorado.

Riviera Holdings announced the bid today and officials said they will give the offer serious attention. Shares in Riviera Holdings jumped to USD 33 on Friday, a new 52-week high, during late afternoon trading on the AMEX.

Eichner made an offer for the company six months ago that was rejected by shareholders as being too low, he said. He said his interest was renewed after a flurry of activity on the North Strip occurred a few weeks ago, including the announcement that the Fontainebleau project next door received financial support from new partner James Packer’s Publishing & Broadcasting Limited, an Australian gambling company.

“I have long had an interest in the Riviera. All that’s happened in the interim is the neighborhood has gotten better,” the 3700 Associates CEO said. 3700 Associates is developing the Cosmopolitan resort project, scheduled to open in the fourth quarter of 2009.

Riviera Holdings has lately been fighting off another potential buyer, Riv Acquisition Holdings, which is embroiled in litigation and a war of words with the casino operator. Riv Acquisition is a group of investors led by Flag Luxury principal Paul Kanavos. The group has made repeated attempts to purchase Riviera Holdings since 2005. The group’s offers have ranged from USD 15 a share, then USD 17 and, in March, USD 27 a share.

Eichner said he believes Riviera directors are looking for a price “with a three in front.”

Riviera Board Chairman William Westerman reiterated his belief that Riv Acquisition’s bid is too low.

“We are not surprised to receive a bid substantially higher than the Riv Acquisition group’s below market bid. We continue to believe that USD 27 per share does not represent full value for our stockholders, which we believe is confirmed by both the company’s current market price as well as by this current USD 30 per share offer,” he said in a prepared statement. “The Board intends to fully consider the USD 30 Eichner Group bid and review it with our advisors.”

Riviera also announced the company had recently hired investment brokerage Jefferies & Co. to explore options during any future offers with the goal of maximizing shareholder value. Eichner says his bid does that. “Or, it will bring other, higher offers,” he said.

The company has lately engaged in a harsh back-and-forth with Riv Acquisition investors who have complained of being unjustly rebuffed by Riviera’s board of directors. Westerman and the board have accused Riv Acquisition of violating company protocols in its zeal to secure additional shares and voting power ahead of a board election scheduled for May 15. Riv Acquisition nominated a slate of hand-chosen candidates and has urged shareholders to elect them.