Eight years after going private, the Fertitta-led Station Casinos has filed for an initial public offering that could reach $100 million.
The company filed a registration statement with the U.S. Securities and Exchange Commission about the proposed IPO. Through its website, Station Casinos Corp. said the number of shares to be offered and the price range for the proposed offering have yet to be determined.
Union Gaming Research analyst Christopher Jones, however, believe the IPO could reach up to $100 million, which “will serve as the pivot point for the reorganization of the company’s corporate structure while also feeling the market on valuation and creating an exit outlet for some of the company’s investors.”
Proceeds from the IPO will help fund Station’s plan to acquire Fertitta Entertainment for $460 million.
Jones estimated an enterprise value of $4.2 billion, assuming there will be a 9.5x multiple on this year’s EBITDA, which falls roughly at $447 million. The implied equity value is estimated at $1.8 billion, after $2.13 billion (existing debt), $360 million (incremental debt to finance Fertitta Entertainment acquisition), $26 million (non-controlling interests), and $117 million (cash) were taken out.
“Based on this evaluation, the $100MM IPO would represent about 5%-7% float, or economic interest in the operating assets. We would expect selling stakeholders to use the public markets as an exit, and see the float increasing over time,” the analyst said in a note.
With the IPO filing, Station Casinos will now have a dual-class structure that will allow existing investors—the Fertitta family—to maintain the control of the company. Station’s CEO Frank Fertitta III and his brother, Lorenzo Fertitta, owns about 58 percent of the casino, while Deutsche Bank holds 25 percent share.
Station Casinos went private in 2007 following a $3.5 billion leveraged buyout, but the debt from that deal took a turn for the worse after the recession hit and the company filed for bankruptcy reorganization in 2009. The casino went back to business in 2011 with much less debt to show for it.
In its filing, the casino operator mentioned it has an undeveloped land in Las Vegas and Reno that could be used for new development. The company also cites its development and management agreements with the North Fork Rancheria and other Native American developments. However, Station remains vague on its plans to grow outside of Las Vegas and Native American gaming at this point.
Station has 19 properties in Southern Nevada, including Red Rock Resort, Green Valley Ranch and Palace Station, and also manages two tribal casinos.
The casino operator is also facing backlash from a union that seeks to bring an international finance scandal before the Nevada gaming regulators. Culinary Union, which represents about 55,000 casino workers in the state, wants gaming officials to investigate if Deutsche is unfit to maintain its ownership stake in Station because of the bank’s involvement in rigging interest rates that affect a wide range of financial loans and contracts, according to a Bloomberg report.
The news agency quoted the union’s letter, which said it is “gravely concerned” about Deutsche Bank’s role in Station, referring to the bank as an “international outlaw.”