Station Casinos Announces IPO in Order to Reorganize the Family Business

Boulder Station - Nevada Station Casinos

Boulder Station Is One of 19 Casinos Owned by Station Casinos.

Station Casinos recently announced it would go public. Christopher Jones of Union Gaming Research said the gaming company’s initial public offering could reach $100 million. The details for the price range of shares, as well as the number of shares to be offered, have yet to be determined.

The IPO is designed to help the principal owners of Station Casinos to reorganize their network of gaming venues and other business ventures. If successful, the original family-owned business will be able to buy control over the wider entertainment company the Fertitta family operates.

Fertitta Brothers

Station Casinos is a Nevada-based mid-market gaming company owned by the Fertitta Brothers: Lorenzo Fertitta and Frank Fertitta III. The company was founded by their father, Frank Fertitta Jr, and has since grown to be a network of 19 casinos, including Red Rock Resort, Palace Station, and Green Valley Ranch.

The brothers are better known as owners of the Ultimate Fighting Championship. They bought the UFC in 2001, after their childhood friend, Dana White, approached them about purchasing the world’s most famous Mixed Martial Arts promotion.

“Pivot Point for Reorganization”

Analyst Christopher Jones said that the IPO “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.”

In particular, going public is meant to raise the capital to the fund Station Casino’s hoped-for purchase of Fertitta Entertainment for $460 million. Fertitta Entertainment describes itself as a an “industry leader in the design, development, and operation of integrated resort and entertainment destinations” In common parlance, the company owns Station Casinos and the UFC.

Attempting to Cement Control of Family Business

The IPO is designed to give the Fertitta Family the opportunity to maintain control of the family business. CEO Frank Fertitta III, who serves as Station Casino’s CEO, and his brother, Lorenzo Fertitta, who is a director on Station Casinos and the American Gaming Association, own about 58% of the casino. Deutsche Bank controls a 25% share.

This is not the first time the gaming company has been publicly traded. In 2007, the brothers planned to take the company private, eventually executing a $3.7 billion leveraged buyout.

2009 Bankruptcy

The buyout might have worked, except for its timing just prior to the real estate market crash of 2008. This left the company dangerously exposed when the Global Recession and banking crisis happened in 2008 and 2009. In 2009, Station Casinos declared bankruptcy and began a reorganization.

In 2011, the company returned to normal business operations with a lot less debt. Since then, the Fertitta Family has maneuvered to gain a better financial footing, while preparing to reestablish a much firmer control of the generational business.

Culinary Union and Deutsche Bank

Several hurdles still loom. One potential trouble spot is an attempt by Culinary Union, which represents about 55,000 casino workers in the state. Culinary Union has asked Nevada gaming officials to investigate whether Deutsche Bank should be allowed to participate in operating a casino, due to a scandal back in Germany. Several of the bank’s executives had to resign after Deutsche was found to be rigging interest rates. According to Bloomberg Report, the rates affected wide range of financial loans and contracts, to the benefit of the financial institution.

At the time those issues were raised, Bloomberg cited a letter sent by Culinary Union to gaming regulators which said the union was “gravely concerned” about Deutsche Bank’s role in operating the Station Casinos. The union described the internationally-influential German financial institution as a “international outlaw”.