Aztar Seeks To Settle Legal Disputes

Last spring Aztar had agreed to be purchased by Pinnacle for $38 a share, and as part of the agreement entered into an arrangement that if the deal failed to consummate, Aztar would pay a Pinnacle a termination fee of termination fee of $52.16 million and termination expenses of $25.84 million.

Once Aztar made the acquisition announcement it became quickly evident the company’s executives had underestimated the value of its assets. Those include the Tropicana casino hotels in Las Vegas - which sits on 34-acres of some of the most valuable land in the world -- and in Atlantic City, a gaming town with 13 casinos that bring in nearly as much revenue as the Strip. 

After announcing the deal, other gaming companies got involved and made bids to purchase Aztar. After two month of frenzied deal making that pushed up the cost of the deal by more than $600 million, Pinnacle lost out on their prime purchase. (Pinnacle still wanted to get into the Atlantic City market and has since struck a deal to acquire the Sands, which will be imploded and replaced)

A winning bid of $54 per share was awarded to Columbia Sussex on May 19 and the deal should be closed before the end of the year.

During the second quarter 2006, Aztar reported a net loss of $66.1 million which was caused by the $78 million in termination fees of its merger agreement with Pinnacle Entertainment, Inc.

The plaintiffs have filed five class action lawsuits alleging among other things that Aztar executives failed to properly conduct an auction or active market check prior to entering into the merger agreement with Pinnacle and by causing Aztar to agree to the termination fee provisions in the Pinnacle merger agreement, which allegedly will deter other bidders for Aztar.

Those filing the suit are looking to gain an injunction against the merger and recoup their losses. Two lawsuits were filed in the Superior Court of the state of Arizona in and for the County of Maricopa, one was filed in the Nevada District Court in and for Clark County, and two were filed in the Court of Chancery of the State of Delaware in and for New Castle County.

Aztar Corporation executives named in the lawsuits include Chairman and President  Robert M. Haddock and Board of Director members John B. Bohle, John A. Spencer, Frank J. Brady, Gordon M. Burns, and Linda C. Faiss

The Arizona complaints are "Plumbers Local Union No. 519 Pension Trust Fund v. Aztar Corp. et al., Case No. CV2006-004622;" and "Robert Glasmann, v. Aztar Corp. et al., Case No. CV2006-004087." The Nevada complaint is "John Drauch v. Aztar Corp. et al., Case No. A519833." The Delaware complaints are "Esther Lowinger v. Aztar Corp., et al., Civil Action No. 2045-N" and "Yolanda Heady v. Robert M. Haddock, et al., Civil Action No. 2090-N."

Now Aztar is trying to get the suit behind them by making a plea to all shareholders of record after February 15, 2005 and the time the acquisition is complete.

The company sent out a notification this week saying those shareholders have been made part of a class action and must specifically request to be removed from the action or be bound to any settlement that might occur. According to statement released by Aztar, a hearing will be held before judge Robert E. Miles at the Superior Court of Arizona on November 21, 2006 “to determine whether the proposed Settlement should be approved by the Court as fair, reasonable, and adequate and to consider the application of Representative Plaintiffs' Counsel for attorney fees and reimbursement of litigation expenses.”

Requests for class action exclusion must be received by Aztar by November 8, 2006.

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