A New Jersey judge has lifted the temporary restraining order (TRO) from the Atlantic Club, clearing the way for the Atlantic City casino to sell itself to a buyer of its choosing while seemingly dealing a death blow to the US aspirations of online poker outfit PokerStars. Stars had struck a deal to buy the financially struggling casino late last year, but the Atlantic Club declared the deal dead after Stars failed to obtain a New Jersey interim gaming license by the late April deadline established in the purchase agreement. Stars disputed the Atlantic Club’s interpretation of what constituted a deadline and sought and was granted the TRO.
At Friday’s hearing in New Jersey Superior Court, Wayne Positan, attorney for Stars’ parent outfit The Rational Group, told Judge Raymond Batten that Stars had “got the short end of the stick” after Stars had “saved [the Atlantic Club’s] butts.” The Associated Press quoted Atlantic Club attorney Tariq Mundiya arguing that Stars “took the risk” that it would receive its gaming license by the deal’s deadline. “They couldn’t get it done and now they want to rewrite the contract. Once that date came and went, Your Honor, all bets were off.”
In the end, Batten sided with the Atlantic Club’s definition of what constituted a ‘drop dead’ deadline, adding that without a defined endpoint, the contract could extend on an infinite basis. While the Atlantic Club is thus free to pursue other buyers, this won’t end the litigation between the two parties, as Stars has already paid the Atlantic Club $11m of the $15m purchase price, yet the Atlantic Club is insisting Stars fork over the remaining $4m, as the contract reportedly compels Stars to pay up regardless.
WHO’S WAITING BEHIND THE CURTAIN?
Following the ruling, Atlantic Club CEO Michael Frawley said the casino was “now free to build on the tremendous opportunity provided by online gaming.” It remains to be seen whether the Atlantic Club will immediately announce a deal with another buyer, and who that buyer might be. Station Casinos, whose Ferttitta Interactive subsidiary operates the first Nevada-licensed online poker site Ultimate Poker, seems an obvious choice, given that the Atlantic Club’s owners Colony Capital LLC also own a chunk of Station. But there are any number of European online gambling operators who were caught flatfooted by Stars’ bold move to buy into the US market, and may now seek to mimic Stars’ strategy (that is, once they recover from the overdose of schadenfreude at Stars’ comeuppance).
Friday’s ruling is also a massive victory for Stars’ nemesis, Caesars Entertainment, which has left no stone unhurled in its efforts to avoid having to compete with Stars in New Jersey’s online gambling market. Beyond direct verbal attacks, Caesars is widely presumed to have been the impetus behind the American Gaming Association’s unprecedented intervention in Stars’ licensing bid. Caesars has publicly pinned its hopes on online gambling to help dig the company out of its crushing debt hole, although few observers expect the new revenue stream will alter Caesars’ fortunes in any significant way.
STARS NEXT MOVE
Shortly after the ruling came down, Stars spokesman Eric Hollreiser tweeted the following: “We are reviewing today’s ruling. We remain committed to New Jersey and to contributing to its economy.” With its gaming license application already filed, could Stars make a play for any of the other struggling Atlantic City casinos? Problem is, the sellers’ expectations have gone up dramatically since New Jersey passed its online gambling law. The February sale of the Trump Plaza for $20m (and assumption of $290m in debt) to California’s Meruelo Group hit a snag last month after billionaire Carl Icahn – who holds the Plaza’s mortgage – declared the purchase price to be too low and declined to sign off on the sale.
Friday’s news may not even be the last knee to the groin this unraveled deal inflicts on Stars. The Star-Ledger quoted former US federal prosecutor Mark Rotert saying the phone call Stars’ founder Isai Scheinberg made to Atlantic Club CFO Eric Matejevich on April 26 may have violated the terms of last year’s $731m civil settlement Stars reached with the US Department of Justice on the Black Friday civil charges. The settlement’s specific wording bars Scheinberg from serving in “any” management role with Stars, and Rotert said Scheinberg’s personal attempt to save the floundering deal “would have constituted management activities.” As such, Rotert suggests Scheinberg’s phone call “provides the government with a basis to complain to the court that this agreement has been breached.”