What's unclear is whether Riviera will consider a revised offer by Riv Acquisition Holdings, a dissident shareholder group with a substantial stake in the company that in late March had its $27 per-share offer dismissed by the board on a technicality. Riv Acquisitions consists of Paul Kanavos and Robert Sillerman, the managing members of New York City-based Flag Luxury Properties LLC; Las Vegas developer Brett Torino; and Starwood Capital Group chairman and CEO Barry Sternlicht.
Riviera's rebuke of Riv's bid prompted Riv to file a lawsuit in Clark County District Court challenging the legality of the board's decision. It also prompted Riv to attempt to replace the board by offering up its own slate of candidates for a vote at Riviera's annual meeting tomorrow (Tuesday, May 15). However, in light of the higher offer, Riv has cancelled its effort to replace the board with hope that the Riviera Board, in the interest of maximizing shareholder value, will decide to allow Riv to try to outbid the new high bidder despite the technicality. Riviera has not yet made any new statements in that regard.
"Now that the Board has indicated that it will seek to maximize shareholder value, we believe that replacing the Board is not necessary at this time," Kanavos stated on Monday. "We expect that the Board will allow our group to participate in the process on an equal footing with other bidders…and will no longer raise technical objections to proposed transaction structures as it has in the past. Our group is currently considering…making a higher offer than the $30 per share expression of interest that the Board announced."
Jeffries & Co. is the financial advisor retained by Riviera to consider the offer from Eichner and Dune Capital. Riviera chairman William Westerman said in a statement that the Riviera board "will insure that all bidders are given a level playing field, with the Board's goal to maximize value for all stockholders," however he did not clarify whether that means Riv will or will not have an opportunity to bid.
Riviera said it rejected Riv's $27 per-share bid because Riv, without prior approval from Riviera's board, entered into a lockup and option agreement for 9.2% of Riviera's outstanding stock now held by Triple Five Investco LLC and Dominion Financial LLC, potentially raising its stake to nearly 20%, which would make it by far the company's largest shareholder. Westerman contended the move by Riv triggered the defensive provisions of Nevada's Business Combination Law and Riviera's articles of incorporation applicable to "substantial stockholders."
Westerman contends that based on Riv's actions the Business Combination Law disqualifies Riv and its related parties from engaging in a merger or other combination with Riviera for a three-year period. In addition, Westerman contends that the defensive provisions of Rivieria's articles of incorporation are such that if Riv ultimately buys Riviera shares from Triple Five, Dominion Financial or anyone else without the Riviera board's prior approval, Riv's voting rights as to those shares will be reduced to 1/100 of one vote per share.
"We rejected (Riv's) requests because, among other reasons, they would have interfered with the ability of all Riviera shareholders to receive and respond to competing acquisition proposals and thereby get the highest value for their shares," said Westerman at the time of the decision.
Riv "vehemently" disagreed with Riviera's position, saying that the Riviera board previously granted Riv a waiver of the anti-takeover provisions in Riviera's articles of incorporation as well as the business combinations provisions in the Nevada corporate statute. Riv contends it asked for approval to acquire outright the stock held by Triple Five and Dominion Financial and only after the Board refused did it purchase the option, which is conditioned on obtaining the necessary Board approvals.
"Ignoring the merits of our offer is directly contrary to the Board's fiduciary duties," stated Kanavos in a written response to the bid rejection. "The Board's legal responsibility is to obtain the highest and best possible value for its stockholders, not to find spurious reasons why bidders (and in this case, the sole bidder) should be disqualified from acquiring the company."
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