Full House dismisses dramatically undervalued Z Capital offer

Full House Resorts’ board of directors has issued a swift and unanimous rejection of a proposed $132.5m takeover, which it had earlier stated could majorly devalue the company.

Put forward by Z Capital Partners and its Affinity Gaming affiliate, which counts an eleven strong casino portfolio spread across Nevada, Colorado, Missouri and Iowa, a $1.79 per share cash or stock offer was put forward.

Stressing a belief that “the potential transaction referenced in your letter is not in the best interests of Full House Resorts and its stockholders,” the firm points to a series of flaws, in addition to a price that “dramatically undervalues the company’s business and does not remotely reflect the company’s strategic value and future prospects”.

Bradley M Tirpak, chairman of the board at Full House, and Daniel Lee, the company’s president CEO and director, who issued the letter in response, also highlight a prior meeting with Z Capital’s MD Andrei Scrivens, and a maintained interest in themselves acquiring Affinity Gaming assets.

The full letter issued to James Zenni, chairman of Affinity’s board of directors and chief executive officer of Z Capital Partners, can be found below.

Dear Mr. Zenni:

The Board of Directors of Full House Resorts, Inc. (“Full House Resorts” or the “Company”) has reviewed your October 22, 2018 letter indicating the interest of Z Capital Partners, L.L.C. and its portfolio company Affinity Gaming (collectively, “you” or “Affinity Gaming”) in acquiring Full House Resorts at a price of $1.79 per share in stock or cash. Our Board has unanimously determined that the potential transaction referenced in your letter is not in the best interests of Full House Resorts and its stockholders.

Your letter indicates a price without specifying a transaction structure or providing evidence of financing. The price dramatically undervalues the Company’s business and does not remotely reflect the Company’s strategic value and future prospects. Our Board and management team see significant upside to the Company’s current and recent trading prices based on already-completed capital projects across our existing portfolio (with the recently launched and highly successful Rising Sun/Rabbit Hash ferry just one of many examples), as well as established or prospective organic growth opportunities in Colorado, Indiana and New Mexico, among other places.

The price indicated in your letter represents a material discount of 35% to the Company’s closing price on October 19, 2018, the last trading day prior to when you publicly announced your proposal, and a discount of 40% to the Company’s volume weighted average price during the preceding three months. This reflects a stark and fundamental disconnect from our Board’s understanding of the Company’s value, as well as that of third party investors and analysts.

We would also note that any combination of Affinity Gaming and our Company presents significant execution risks in light of the jurisdictional overlaps between Affinity Gaming and Full House Resorts.

When we met with Andrei Scrivens at Z Capital’s offices in Lake Forest, Illinois on September 21 – our only meeting – our purpose was to express potential interest in acquiring certain of Affinity Gaming’s assets. We remain interested in doing that.

Our Board and management team collectively own approximately 17% of Full House Resorts’ shares, and our highest priority is creating value for the Company’s stockholders. Based on our review, we are fully confident that our strategic plan will deliver value for our stockholders far superior to the value your letter indicates. Accordingly, our Board has no interest in pursuing what you propose.

On behalf of the Board of Directors.

Bradley M. Tirpak Daniel R. Lee
chairman of the board president, chief executive officer and director