Riviera suitor increases bid to $34 a share

Riv Acquisition increased its bid for the Riviera's parent company Wednesday to $34 per share, a 13 percent premium on the offer made last week by a competing group.

In a letter to Riviera Holdings Corp.'s board of directors, Riv Acquisition, which controls 20 percent of Riviera's stock, asked for a response to the offer by 5 p.m. today.

The offer follows the $30 per share bid made Friday by an investment group led by Cosmopolitan developer Bruce Eichner.

Riviera Holdings Chairman and Chief Executive Officer William Westerman said the board will work with financial advisory firm Jefferies & Co. to get the best price for the company before taking the offer to the shareholders.

The $423.6 million offer is Riv Acquisition's third bid for the gaming company.

The investment group's initial $17 per share offer was rejected by shareholders in August. A follow-up $27 per share offer on March 26 was blocked by Riviera Holdings' board.

"We would expect the board to take the proposal very seriously and cease raising technical obstacles that we believe do not apply," Paul Kanavos, a managing member of Flag Luxury Properties and a leader of Riv Acquisition, said in a statement.

The $27 per share offer was blocked on the grounds that Riv Acquisition colluded with two major shareholders for an additional 9.2 percent of shares. The offer required approval of 60 percent of the company's shareholders.

Riv Acquisition responded by nominating a slate of new board nominees but withdrew it a day before Tuesday's annual shareholders meeting after Riviera Holdings hired the advisory firm and received the Eichner group's higher bid.

A lawsuit challenging March 26 rejection of Riv Acquisition's bid was filed in District Court in April and has not been withdrawn.

A spokeswoman for Eichner said he is weighing his options but declined further comment.

Marc Sole, senior vice president with D.E Shaw ,New York-based investment group D.E. Shaw, which controls just less than 10 percent of Riviera Holdings' stock, said the firm is thrilled with the board's decision to open the bidding.

"We think both bids are credible bids," said Sole, who sent a letter expressing concern about the initial $17 per share bid. "We expect the board will do the right thing and consider them both fully and fairly."

The eventual sales price may be driven higher by announcement late Tuesday that the 34.5-acre New Frontier site a mile south on the Strip was being purchased for $33 million per acre, or $1.2 billion.

Riviera Holdings owns the 2,250-hotel room Riviera on the Strip and a casino in Black Hawk, Colo.

John Knott, executive vice president of the Global Gaming Group for CB Richard Ellis, said Riv Acquisition's offer amounts to $20 million per acre for the Riviera property on the Strip, factoring out the Black Hawk property.

He added that a Riviera sale may be comparable to the pending sale of the 26-acre Sahara property for approximately $20 million an acre.

"For somebody to get after the Riviera at a bidder price of $27 or $28 million per acre, they would have to have a pretty unique development," Knott said.

Riviera Holdings shares gained $3.42, or 10.35 percent, to close at $36.47 Wednesday on the American Stock Exchange. The price peaked at a 52-week high of $37 earlier in the day.