PokerStars Appeal to Buy Atlantic Club Casino Rejected
In a long and arduous story, the ties that bound Atlantic Club owners, Colony Capital, and Rational Group, owners of PokerStars, have been irrefutably severed. A judge ruled on Monday that Colony Capital was well within its rights to revoke the sales agreement of its New Jersey casino. Not only that, but the Rational Group would have to forfeit the $11 million it had already handed over to Colony Capital as a gesture of good faith, back when the negotiations were moving along so swimmingly.
This has been a whirlwind of events for both companies. It began like the negotiations for any normal business acquisition. In December of 2012, when the Atlantic Club was precariously floundering, near the brink of sinking below market sea level, the Rational Group swooped in with an offer to purchase the New Jersey casino for $15 million. Colony Capital was perfectly appeased by the offer and negotiations began. Atlantic Club was dropping fast, and Rational Group was quick to push money in that direction as it would help keep the casino alive until such time as the acquisition was completed. All told, Rational put $11 million on the table – $750,000 per week – which Colony Capital was more than happy to take. The group had also agreed to take care of Atlantic Club’s pension liabilities, tallied at $30 million, while agreeing to spend $20-$40 million in refurbishments when the deal was over.
In May, the ice broke out from under the deal. Rational Group was delayed in receiving its licensing from New Jersey, and the expiration date for the acquisition passed. Colony Capital immediately revoked its agreement. The parent company of PokerStars contested the revocation, asking the courts to give them sole rights to purchase of Atlantic Club, but that motion was rejected. They appealed the ruling, again asking for sole rights to purchase, and if denied, asking that the $11 million invested in the deal be returned. Again, a judge denied Rational Group’s request, on both counts. During the proceedings, Colony Capital not only fought to retain the $11 million, they also requested payment of the remaining $4 million purchase price since Rational Group failed to meet its obligations on time; the only request that was denied Colony Capital.
It would certainly seem that the American courts are favoring its home-based Colony Capital over the offshore Rational Group, who has been working diligently to get a foothold in the US market ever since individual states were given the option to legalize online gambling. As the operator of the world’s largest real-money online card gaming site, PokerStars, Rational Group stands to gain a lot of ground by snatching up a land-based casino in New Jersey. The company made it clear that they are still focusing on an acquisition in New Jersey after the original appeal was denied, but no comment has been made available since Colony Capital walked away scot-free with the $11 million.
At present, Colony Capital retains ownership of Atlantic Club, which remains afloat thanks to the $11 million from Rational Group while, in all likelihood, seeking a new buyer at an inflated price. In December, when negotiations began, online gambling was still prohibited in the Garden State. Industry analysts speculate strongly that the reason Colony Capital strove so hard to get out of the deal was merely because New Jersey Governor Chris Christie signed a bill legalizing online gambling in March of 2013. As such, Colony Capital stands to get a much better asking price for its Atlantic Club Casino. The only thing that is certain is that Rational Group will not be the casino’s eventual buyer.