LAS VEGAS (CN) — Former Republican National Committee Chairman Frank Fahrenkopf Jr. is among the director defendants in a shareholder class action challenging Eldorado Resorts’ $1.7 billion acquisition of the Isle of Capri Casinos.
Lead plaintiff Warren Morse sued Eldorado Resorts Inc. and its seven-member board on Nov. 23 in Clark County Court, citing a number of problems with the proposed merger, in which Eldorado offers $23 a share for Isle of Capri, or 1.638 shares of Eldorado stock for each Isle of Capri share, at Isle of Capri shareholders’ discretion.
First, Morse claims Eldorado failed to disclose material information about the “highly dilutive share issuance conducted in connection with (the) merger.” In its SEC registration statement, Eldorado said it will issue 28.5 million shares of stock for Isle of Capri shareholders.
Second, J.P. Morgan Securities was paid $11 million as Eldorado’s sole financial adviser on the deal, and is providing Eldorado with $2.1 billion in debt financing for the merger, for which it can expect to receive even more than the $11 million it got for its advice, Morse says in the complaint.
Eldorado owns and operates casinos and hotels in five states, with more than 10,300 slot and video lottery machines and 4,900 hotel rooms.
Fahrenkopf, 77, was chairman of the Republican National Committee from 1983 to 1989, is co-chairman of the Commission on Presidential Debates, and was the American Gaming Association’s first president, from which he retired in 2013. He has been a director of Eldorado since 2014.
Also named as defendants are the company’s CEO Gary L. Carano; CFO Michael E. Pegram; and directors James B. Hawkins, Thomas R. Reeg, David P. Tomick and Roger P. Wagner.
Morse seeks class certification and an injunction blocking the merger and the issuance of shares until the directors disclose all the necessary material information to the shareholders who will be asked to vote on the merger.
He is represented by Andrew Muehlbauer in Las Vegas, and Andrews & Springer in Wilmington, Del.