From the archive, originally posted by: [ spectre ]

http://orlando.bizjournals.com/orlando/stories/2006/12/04/daily33.html

Seminoles to buy Hard Rock International

The Seminole Tribe of Florida said Thursday it has a deal with The Rank
Group Plc to buy its subsidiary, Orlando-based Hard Rock International
Inc., for nearly $1 billion.

The $965 million deal is expected to close in early March 2007.

Corporate headquarters for the company will remain in Orlando.

The Seminoles expect to fund the purchase price from a combination of
debt issued by a new Hard Rock operating company and equity funding
from the tribe’s gaming division.

The Seminole Tribe of Florida currently owns and operates two Seminole
Hard Rock Hotels & Casinos in Tampa and Hollywood, Fla., under terms of
a license agreement with Hard Rock International.

Hard Rock operates 124 Hard Rock Cafes in 45 countries and owns what is
believed to be the world’s largest collection of authentic music
memorabilia.

In addition to acquiring the memorabilia, the purchase includes the
Hard Rock brand, 68 company owned Hard Rock Cafe Restaurants and retail
stores, including 44 in the United States, three in Canada, 17
throughout Europe, three in Australia and one in Puerto Rico, and
licensing or franchise agreements for another 56 restaurants and five
hotels, plus Hard Rock Live performance venues such as the one at
Universal Orlando.

The purchase is believed to be the first of a major international
corporation by a Native American Indian tribe.

Seminole Gaming CEO James Allen says that because the current lease
arrangement involves licensing fees in excess of 25 percent of Hard
Rock’s corporate profits, buying Hard Rock will allow the tribe to use
those funds in the acquisition.

Tribe executives say they plan to work with the current Hard Rock
management to continue existing plans for growth and to develop new
strategies to accelerate growth.

Seminole Gaming is headquartered in Hollywood, near Fort Lauderdale. It
is part of the Seminole Tribe of Florida, a sovereign government with
an elected Tribal Council of five members. More than 90 percent of the
tribe’s budget currently is derived from gaming revenue. Its business
operations currently include cattle ranching, citrus production,
tourism promotion, sports management and tobacco sales.

In addition to the Seminole Hard Rock Hotels & Casinos, the Seminole
Tribe also owns and operates five more non-Hard Rock Florida casinos in
Coconut Creek and Hollywood on the southeast coast, in Immokalee near
Naples, on the Brighton Reservation north of Lake Okeechobee and on the
Big Cypress Reservation south of Lake Okeechobee.

Piper Jaffray is serving as the tribe’s financial advisors, and
Greenberg Traurig LLP and Eric Dorsky P.A. are the tribe’s legal
advisors. Merrill Lynch conducted the sale on behalf of The Rank Group
Plc, which acquired the Hard Rock brand in 1990 as part of Mecca
Leisure, later acquiring Hard Rock America from Peter Morton in 1996 to
consolidate the worldwide brand.

http://orlando.bizjournals.com/orlando/gen/Piper_Jaffray_2AD2CB431B3C4879A7F26616987003CA.html

http://www.timesonline.co.uk/article/0,,2095-2495966,00.html

Florida tribe’s Hard Rock coup

The Seminole Indians have ridden in with $965m to snap up the
restaurant chain from Rank
by Matthew Goodman

THE Seminole Indian tribe knows how to throw a party. The opening of
its first Hard Rock casino and hotel two years ago had a team of 10
skydiving Elvis impersonators as well as the traditional
guitar-smashing ceremony that occurs whenever the chain opens a new
venue.

When the tribe clinched the deal last Thursday to buy the entire Hard
Rock Cafe restaurant chain, the Seminoles – in traditional dress and
accompanied by a medicine man – were presented with a Gibson guitar
once owned by Hank Williams. And they promised the celebrations
wouldn’t end there.

“It will be one hell of a party,” said Jim Allen, chief executive
of Seminole Gaming, after his acquisition of Hard Rock International
from Rank Group, the leisure conglomerate, for $965m (£493m).

The tribe already operates seven casinos in Florida, including two Hard
Rock hotel and casino resorts in Tampa and Hollywood. It will now add
124 restaurants in 45 countries, as well as the world’s largest
collection of rock memorabilia, which has an Eric Clapton guitar and
items from Elvis, Bob Dylan and Madonna.

The tribe’s victory in the auction for Hard Rock has surprised many,
particularly as the deal marks the first time a native American tribe
has acquired a big international company. The competition was
formidable – it included the large buyout firms Permira and Apollo,
and the investment fund controlled by Robert Pittman, the entrepreneur
who co-founded the MTV television station.

“There’s a tremendous amount of pride in the tribe today,” said
Allen. “It’s a legendary statement for the Seminole and for all the
tribes in North America. We were competing against some of the biggest
hedge funds and private-equity firms. We competed on a level playing
field and we were successful.”

The agreement marks the culmination of a six-year association with
Rank. In January 2001 the two organisations announced a partnership
that led to the Seminoles developing the hotel and casino complexes
under licence in Florida.

To finance the latest deal, the tribe is putting up between 45% and 48%
of the price in equity; the rest will be financed through debt, which
it has already arranged. That debt will be secured against the Hard
Rock assets. Allen said that the tribe had created a new entity, called
Seminole Hard Rock Entertainment, that will be the holding company for
the chain.

Gambling already accounts for the lion’s share of the income
generated by the tribe’s commercial activities, which stretch to
cattle farming and citrus growing. Allen is coy about divulging details
of the tribe’s financial position, but the gaming operations
contribute more than 90% of the tribal budget. He also notes that
licensing fees from its two Hard Rock sites “were starting to
represent 30% of the brand’s profits worldwide”. Some estimates
suggest that the two venues alone generate revenues of more than $700m.

Last year Rank’s Hard Rock operation made a profit of £34.8m. Allen
said one of the impressive things about the chain was its staying
power. “It has been around for 35 years and it has competed with
everyone – international brands like Planet Hollywood, Rainforest
Cafe and, in America, chains like Nascar Cafes. The only one that has
survived the test of time has been Hard Rock Cafe.”

Despite his enthusiasm for the restaurants, it is the hotel and casino
side where the tribe sees the potential for growth. “There are 128
restaurants and only five hotels – we think that’s the growth
opportunity,” said Allen, who said it was “too premature” to talk
about specific locations for future venues.

It should come as little surprise that the Seminoles would like to
concentrate on opening more hotels and casinos. The tribe paved the way
for the native American people’s move into gaming when it opened a
high-stakes bingo hall and casino in 1979. Since then, other tribes
have followed and turned to gaming for their income. In several states
the casinos on Indian reservations are the only legalised gaming venues
that are permitted.

Despite the financial success of the reservation-based casinos, the
Seminole tribe has attracted its share of controversy. The Internal
Revenue Service, America’s tax-collecting organisation, probed the
financing deal to fund the construction of the tribe’s two Hard Rock
venues. It declared that the $415m of tax-free bonds used were illegal
and, in October 2005, the tribe announced that it would issue $730m in
bonds to pay off the original bonds.

The tribe is also embroiled in a bitter dispute with Power Plant
Entertainment, a subsidiary of the company that developed its Hard Rock
sites, over fees it must pay from income generated by the casinos.

And not everyone welcomed the development of the Hard Rock hotel in
Hollywood – the tribe forced the eviction of 200 residents of a
mobile-home park to free up land to build the venue, prompting many of
the residents to try to sue the tribe.

If Allen is concerned that expanding from the tribe’s Florida
heartland to become an international concern will inevitably lead to
hiccups, he does a good job of masking it.

“It’s not a worry at all,” he said. “I have been in the casino
industry for 28 years and nobody here has less than 21 or 23 years’
experience. And, most important, the purchase does not require a whole
new management team as we are buying a respected team.”

The only people who managed to put a damper on all the excitement last
Thursday were in the City of London. Rank’s shares fell 4.1% on the
day the deal was announced, although some of the drop was due to a poor
trading statement by the company. In a note to clients, analysts at
Morgan Stanley expressed disappointment at the price achieved by Rank,
arguing that it fell significantly short of its valuation of £593m. It
is unlikely that too many members of the Seminole tribe will be
complaining.