Esplanade Capital Urges Board of Archon Corporation to Consider Its Offer to Acquire the Company
10:00a ET April 15, 2013 (Business Wire)
Esplanade Capital LLC, the second largest outside shareholder (based on Bloomberg data) of Archon Corporation (OTC: ARHN), has made an offer to acquire all outstanding shares of Archon Corporation at a price of $17.50 per share in a negotiated transaction, subject to confirmatory due diligence. Esplanade Capital has delivered two letters to Archon's board of directors, the full texts of which follow:
For Delivery on April 15, 2013
Archon Corporation Board of Directors Attention: Suzanne Lowden, Secretary 2200 Casino Drive Laughlin, NV 89029
Dear Members of the Board of Directors:
On March 28, 2013, Esplanade Capital LLC ("Esplanade" or "We") made an offer to acquire all outstanding shares of Archon Corporation (the "Company" or "ARHN") at a price of $17.50 per share in a negotiated transaction, subject to confirmatory due diligence. We made this offer directly to the Board of Directors ("The Board") on March 28 and followed up directly with the Company on April 4.
The Company has not responded to our overtures. We believe that all shareholders deserve to learn about our offer which represents a 61.6% premium to the average closing price over the 90 trading days prior to the date of our offer (using the most recent prior closing price if no trading occurred on that day). We ask that The Board immediately commence negotiations with us or publicly commit to a sales process.
We are releasing our March 28 letter along with this letter to the public concurrently with its delivery to you.
Very truly yours,
Shawn W. Kravetz
President
cc: Paul W. Lowden at P.O. Box 270820 Las Vegas, NV 89127 Howard Foster (electronically)
The full text of Esplanade's March 28 letter to the Archon board of directors follows:
March 28, 2013
Archon Corporation Board of Directors Attention: Suzanne Lowden, Secretary 2200 Casino Drive Laughlin, NV 89029
Dear Members of the Board of Directors:
Esplanade Capital LLC ("Esplanade" or "We"), proposes to acquire all outstanding shares of Archon Corporation (the "Company" or "ARHN") at a price of $17.50 per share in a negotiated transaction, subject to confirmatory due diligence. This represents a 61.6% premium to the average closing price over the past 90 trading days (using the most recent prior closing price if no trading occurred on that day). Of course, should you be able to demonstrate additional value, we would consider increasing our offer.
Through the management of Esplanade Capital Partners I LLC, We and our affiliates have been significant shareholders in ARHN since 2006. As background, Esplanade was founded in 1999 and manages two private investment partnerships. We have been investing for over thirteen years, largely by identifying undervalued or underappreciated public companies.
To assist us in this transaction, we expect to be working with a longtime outside relationship who has built an impeccable track record of several billion dollars worth of real estate acquisitions, restructurings, and recapitalizations over the past three decades.
With the Company's cooperation, we are highly confident in our ability to finance this transaction based on discussions with our network of equity and debt financiers.
We believe ARHN is currently undervalued and has underperformed. Management and the Board of Directors ("The Board") have taken little action to address this underperformance and unlock shareholder value for all holders of the Company's common stock. In fact, in recent years, we believe management has acted in a manner contrary to the non-Lowden common shareholder interests, with a pattern of questionable management and corporate behavior including the following:
2005: In a complaint filed with the Securities and Exchange Commission,
D.E. Shaw & Co. claims that (Paul) Lowden gave bonuses worth $4
million each to close relatives to the detriment of minority
shareholders.
2007-8: The Company failed to close a deal to sell Las Vegas Strip real
estate at extremely favorable valuations.
2011: The Company employed a reverse and forward stock split to eradicate
small shareholders, resulting in the cessation of registration,
commonly known as "going dark," that eliminated public reporting
requirements thereby drastically reducing the ability of shareholder
to obtain current material information about the Company.
2012: In the Company's financial statements dated March 31, 2012, the
Company sent financials that we believe had misstated and inflated
diluted share-count by 912,500 shares (an increase of over 15%).
Given what we see as the Company's history of granting inappropriate
stock options, we were understandably concerned when we identified
this discrepancy in our routine due diligence. The Company and its
accounting firm have failed to respond to our questions, but we did
finally receive acknowledgment from a member of the Board of
Directors that an error had been made.
Ongoing: The Company is entangled in a series of lawsuits, including the
continuing dispute with holders of the Company's preferred stock.
Ongoing: Over the years, as a concerned shareholder we have repeatedly tried
to engage Mr. Lowden (through letters, telephone calls, and one
visit to corporate headquarters) but have been consistently ignored.
Ongoing: The Company has engaged in numerous related party transactions
including accepting promissory notes from the brother of Mr. Lowden
for his exercise of stock options and from the son of Mr. Lowden for
the sale of a Ford F-150 SuperCrew Short Bed vehicle.
We appreciate your reply and welcome the opportunity to discuss this directly with the Board of Directors at your earliest convenience.
Very truly yours,
Shawn W. Kravetz
President
cc: Paul W. Lowden at P.O. Box 270820 Las Vegas, NV 89127 Howard Foster (electronically)
ABOUT ESPLANADE CAPITAL LLC
Esplanade Capital is a Boston based investment management company founded in 1999 to manage capital for a small number of like-minded families, private investors, and institutions
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130415005169r1&sid=cmtx4&distro=nx
SOURCE: Esplanade Capital LLC
Esplanade Capital LLC
Ashley Hyotte, 617-502-9933
Vice President
Ashley@esplanadecapital.com
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