AREP Paying $652M for Icahn's Gaming, Oil Assets

MOUNT KISCO, NY-Locally based American Real Estate Partners LP says it has agreed to acquire additional oil and gas and gaming and entertainment assets in transactions with affiliates of Carl C. Icahn, which owns a significant stake in AREP. The transactions total $652 million, of which $180 million is payable in cash and the balance of which is payable by the issuance of AREP’s limited partnership depositary units valued at $29 per unit. The cash will be financed through the anticipated issuance by AREP and its subsidiary, American Real Estate Finance Corp., of a new issue of senior notes due 2013 in the principal amount of approximately $300 million. The transactions include the acquisition of:

• the membership interest in NEG Holding LLC other than that already owned by National Energy Group Inc. (which is itself 50.01% owned by AREP);
• 100% of the equity of each of TransTexas Gas Corp. and Panaco, Inc., all of which will be consolidated under AREP Oil & Gas LLC, which is wholly owned by American Real Estate Holdings LP;
• 41.2% of the common stock of GB Holdings Inc. and warrants to purchase, upon the occurrence of certain events, 11.3% of the fully diluted common stock of its subsidiary, Atlantic Coast Entertainment Holdings, Inc., which owns 100% of ACE Gaming LLC, the owner and operator of The Sands Hotel and Casino located in Atlantic City, New Jersey.
• Icahn currently owns indirectly approximately 86.5% of AREP’s outstanding depositary and preferred units and indirectly owns 100% of AREP’s general partner, American Property Investors Inc. Upon the closing of the aforementioned transactions, Icahn will own approximately 90.1% of AREP’s outstanding depositary units and 86.5% of its preferred units assuming no purchase price reductions. Prior to the transactions, each of AREP and Icahn’s affiliated companies owned oil and gas and gaming and entertainment assets. Upon completion of these transactions, all such assets held by Mr. Icahn’s affiliates will have been acquired by AREP. AREP currently operates in three core businesses: real estate; gaming and entertainment; and oil and gas. As a result of these transactions, AREP will have substantially increased its oil and gas holdings, as well as expanded its gaming and entertainment holdings.NEG Operating LLC, a wholly-owned subsidiary of NEG Holding, is engaged in the exploration and production of oil and gas, with interests in approximately 700 wells in Arkansas, Louisiana, Oklahoma and Texas. TransTexas is engaged in the exploration, production and transmission of oil and gas, with interests in 55 wells located primarily in South Texas. Panaco is engaged in the exploration and production of oil and gas, with interests in 147 wells primarily in the Gulf of Mexico and the Gulf Coast Region.Before the acquisition of GB Holdings and Atlantic Holdings securities, AREP owned approximately 36.3% of the outstanding common stock of GB Holdings and warrants to purchase, upon the occurrence of certain events, approximately 10% of the fully diluted common stock of Atlantic Holdings. As a result of the transactions, AREP will own approximately 77.5% of the common stock of GB Holdings and warrants to purchase approximately 21.3% of the fully diluted common stock of Atlantic Holdings. AREP also owns approximately $63.9 million principal amount, or 96.4%, of the 3% senior notes due 2008 of Atlantic Holdings, which, upon the occurrence of certain events, are convertible into approximately 42.1% of the fully diluted common stock of Atlantic Holdings. If all outstanding Atlantic Holdings notes were converted and warrants exercised, AREP would own approximately 63.4% of the Atlantic Holdings common stock, GB Holdings would own approximately 28.8% of the Atlantic Holdings common stock and the remaining shares would be owned by the public.