Market Skeptical Of Las Vegas Entertainment Network Bid
By RICK JURGENS
PHOENIX -- Las Vegas Entertainment Network Inc. (LVEN) is counting on an infusion of cash from a Las Vegas man using an Indonesian bank account to finance a $95.1 million tender offer for Jackpot Enterprises Inc. (J), but investors remain skeptical.
Las Vegas Entertainment - which had no revenue and posted a loss of $5.3 million during the nine-month period that ended July 31 - made its multi-million dollar offer for Jackpot despite a balance sheet where current assets of $198,000 are outweighed by current liabilities of $792,000.
The market is acting as if the Los Angeles company, which describes itself as a media and gambling facility developer, is bluffing with its bid for Jackpot, which operates slot machines and a casino in Nevada. Jackpot's stock closed at 9 7/16 Monday, up 13/16 from its close prior to the Las Vegas Entertainment bid but still 1 9/16 below Las Vegas Entertainment's offer of 11.
A Las Vegas Entertainment spokesman referred an inquiry about the tender offer to Chief Executive Joseph Corrazzi, who was not immediately available for comment. Jackpot officals also did not respond to requests for comment.
But the deal depends on financing from Fred and Kari Cruz of Las Vegas, who, according to documents filed with the Securities and Exchange Commission Friday, agreed Sept. 29 to invest $190 million in Las Vegas Entertainment in exchange for 12.2 million shares of stock.
That financing - which does not appear to be reflected in the balance sheet filed with Las Vegas Entertainment's tender offer - priced its stock at $15.57 a share, nearly three times its 52-week high of 5 5/8 and more than four times its Monday closing price of 3 25/32.
The Cruz's previously received 3 million shares in Las Vegas Entertainment in exchange for providing financial backing for its bid for an interest in a Brazilian company, according to the filing. Fred Cruz told Dow Jones Newswires that he is originally from Brazil.
According to Cruz, he is a doctor of internal medicine and can "make anybody live to 100." The Nevada Board of Medical Examiners said Cruz is not registered with them. The office which regulates osteopathic medicine in Nevada was closed Monday afternoon.
Cruz said the money for his investment in Las Vegas Entertainment came not from his medical practice but from inheritances and trusts.
Las Vegas Entertainment's tender offer includes as an exhibit a letter from U.S. Guarantee Corp. agreeing to provide Cruz with $400 million in exchange for bank guarantees provided by B.N.I. Bank of Indonesia.
U.S. Guarantee does not have a listed telephone number in Scottsdale, Ariz., where, according to its filing with Nevada's Secretary of State, its office is located.
Cruz said he has not visited Indonesia but has had business dealings there.
Fred Cruz said that Kari Cruz is his wife but referred other questions about Las Vegas Entertainment's tender offer to the company.
The Cruz's deal - which, according to the tender, had a closing deadline of "Sept. 31, 1999" - would apparently give them majority of the shares in Las Vegas Entertainment, which currently has 8.6 million shares outstanding. During its current fiscal year it paid bills with 1.5 million shares, sold another 250,000 shares in a $297,500 private placement and got a $443,000 loan from Corrazzi, according to its filings.
Las Vegas Entertainment's offer for Jackpot is subject to approval by Nevada gambling regulators, according to the filing. A spokeswoman for the Nevada Gaming Control Board said neither Las Vegas Entertainment nor Cruz have a license or a pending application for a license to run gambling operations in the state.
To obtain such a license, applicants are subject to an investigation covering their business probity, financial background, associates and company's track record. Gambling regulators also review the structure of the offer, a spokesman said.
Jackpot operates 3,909 slot machines in 385 Nevada locations, including supermarkets, and operates the Pony Express Casino in Jackpot, Nev. In the fiscal year which ended June 30, it posted revenue of $95.7 million and net income of $4.6 million, or 53 cents a share. Since 1996 it has unsuccessfully sought a buyer for the Pony Express and another casino which it closed in June. It also has a license to manufacture and distribute slot machines.
-Rick Jurgens, Dow Jones Newswires; 602-258-2003;
richard.jurgens@dowjones.com |
