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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 30, 1998
GRAND CASINOS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 0-19565 41-1689535
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
130 CHESHIRE LANE, MINNETONKA, MINNESOTA 55305
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 449-9092
NOT APPLICABLE
(Former name or former address, if changed since last report)
Exhibit Index Appears on Page 3
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ITEM 5. OTHER EVENTS.
The Registrant's Press Release dated June 30, 1998, which is filed as
Exhibit 99.1 to this Form 8-K, is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
99.1 Press Release dated June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRAND CASINOS, INC.
(Registrant)
Date: July 1, 1998 By: /s/ Timothy Cope
----------------------------
Name: Timothy Cope
Title: Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
99.1 Press Release......................................... 4
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Exhibit 99.1
Grand Casinos, Inc. (ticker: GND, exchange: New York Stock Exchange) News
Release - Tuesday, June 30, 1998
........................................
GRAND CASINOS ANNOUNCES MERGER OF ITS MISSISSIPPI CASINOS WITH HILTON
GAMING OPERATIONS
New Corporation to Be World's Largest Casino Gaming Company
MINNEAPOLIS, JUNE 30, 1998 - GRAND CASINOS, INC. (NYSE: GND) today announced
that it will separate its Indian casino management business from its
Mississippi gaming operations and simultaneously merge its Mississippi gaming
operations with the gaming operations of Hilton Hotels Corporation (NYSE: HLT).
Hilton said today that it will separate its gaming and lodging operations
through a tax-free distribution to Hilton shareholders of the shares of the new
gaming company. The resulting publicly held company will be the largest and
most diversified casino gaming corporation in the world. Shares of a new
publicly held company that holds Grand Casinos' Indian casino management
business and various other assets will be distributed on a tax-free basis to
Grand Casinos shareholders.
The transactions are subject to shareholder and regulatory approvals and are
expected to be completed by year-end 1998. Grand Casinos plans to obtain a
ruling from the Internal Revenue Service that the distribution will not be
taxable to Grand Casinos shareholders; the merger cannot proceed unless the
Hilton and Grand Casinos spin-offs occur. Both companies' boards of directors
have approved the transactions.
The merger, which will involve only Grand Casinos' three casino resort
operations in Tunica, Gulfport, and Biloxi, Mississippi, should result in Grand
Casinos shareholders owning approximately 13.6 percent of the new gaming
company, with Hilton shareholders owning approximately 86.4 percent of the new
gaming company. Under the merger agreement, Hilton shareholders will receive
one share of the new gaming company for every share owned in Hilton Hotels
Corporation. Grand Casinos shareholders will receive shares of the new gaming
company determined by an exchange ratio based upon a "valuation factor" for
Grand Casinos' Mississippi casino business and a "valuation factor" for the new
gaming company business as described on the attachment to this press release
titled "Determination of Exchange Ratio."
Grand Casinos shareholders will also receive shares in a newly formed company -
the name of which will be determined at a later date - comprised of Grand
Casinos' Indian casino management business and various other assets that Grand
Casinos expects to spin off tax-free to its shareholders contemporaneously with
the merger.
Total consideration of the Grand Casinos assets to be merged into the new
gaming company is expected to be approximately $1.2 billion, including
assumption of approximately $550 million of Grand Casinos net debt estimated to
be outstanding as of December 31, 1998.
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Pro forma 1997 EBITDA for the new gaming company was approximately $650
million. As the world's largest gaming company, the new entity in 1999 will
have 18 gaming properties with a total of 1.4 million square feet of gaming
space, and more than 23,000 hotel rooms. The merged gaming company will also
have a significant presence in virtually every major U.S. gaming market,
including Nevada, New Jersey, Mississippi, Louisiana, and Missouri as well as
international operations in Australia and Uruguay.
Grand Casinos Chairman of the Board Lyle Berman said the transactions present
an attractive opportunity for Grand Casinos' shareholders. "The merger
achieves our long-term goal of diversifying Grand Casinos' operations. Grand
Casinos shareholders will have an outstanding opportunity for growth as part of
the world's largest gaming company, while at the same time we are able to
minimize our existing exposure of having the majority of our company-owned
assets concentrated in one state," said Berman. "The new gaming company will
have a significant presence in the traditional U.S. gaming markets and will
also be the leader in emerging gaming markets, including Mississippi, where we
are the largest casino operator."
Commenting on spinning off the Indian casino management business as a separate
public company, Berman added, "Grand Casinos started in the casino
entertainment industry as a management company for Indian-owned casinos. We
know this business well and have realized excellent returns on investments from
it. Going forward we will continue to perform on our existing management
agreements. We will seek to extend and grow our Indian gaming management
business and potentially pursue other related, attractive business
opportunities."
Berman said that Grand Casinos shareholders will participate in an even bigger
growth opportunity by being part of the new gaming company formed by merging
Grand Casinos' Mississippi casino operations with Hilton's worldwide gaining
assets. "The new gaming company will be large enough to acquire new casino
chains or individual casino properties as opportunities arise, thereby fueling
a growth rate that smaller gaming companies simply can't achieve," Berman
said. "Likewise, the sheer size of the new gaming company will allow greater
access to capital, at more attractive rates, with which to enhance and expand
the operations. Simply put, Hilton and Grand Casinos realize that we can
achieve more together than we can apart."
The new company will pool its top management talent up to and including
executive management. Berman, Grand Casinos chairman of the board, will be a
member of the new gaming company's board of directors and will be active in the
new company. Thomas Brosig, Grand Casinos president and chief executive
officer, will assume responsibility for the new gaming company's emerging
market operations, which include Mississippi, Louisiana and the Midwest.
Additionally, Stephen F. Bollenbach, president and chief executive officer of
Hilton Hotels Corporation will become chairman of the new gaming company, while
retaining his positions with Hilton. Arthur M. Goldberg, currently president
of Hilton's gaming operations, will become the new gaming company's president
and chief executive officer, and serve on the new company's board of directors.
Grand Casinos is being advised in this transaction by the investment banking
firm of Ladenburg Thalmann.
Grand Casinos, Inc. is a publicly traded company listed on the New York Stock
Exchange under the trading symbol GND. The company currently owns and operates
the three largest casino hotel resorts in
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the state of Mississippi, manages two land-based casinos in Louisiana, and
manages one casino hotel resort in Minnesota.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this press
release (as well as information included in oral statements or other written
statements made or to be made by the Company) contains statements that are
forward-looking, such as statements relating to plan for future expansion and
other business development activities as well as other capital spending,
financing sources and the effects of regulation (including gaming and tax
regulation) and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to, those
relating to development and construction activities, dependence on existing
management, leverage and debt service (including sensitivity to fluctuations in
the interest rates), domestic or global economic conditions, activities of
competitors and the presence of new or additional competition, fluctuations and
changes in customer preferences and attitudes, changes in federal or state tax
laws of the administration of such laws and changes in gaming laws or
regulations (including the legalization of gaming in certain jurisdictions).
For more information, review the Company's filings with the Securities and
Exchange Commission, including the Company's annual report on Form 10-K and
certain registration statements of the Company.
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CONFERENCE CALLS SCHEDULED
HILTON HOTELS CORPORATION AND GRAND CASINOS, INC. HAVE SCHEDULED A JOINT
CONFERENCE CALL FOR ANALYSTS/INVESTORS REGARDING THE INFORMATION CONTAINED IN
THIS PRESS RELEASE. THE CALL WILL BE HELD TODAY, TUESDAY, JUNE 30, 1998, AT
11:00 A.M. EASTERN TIME.
To participate in the analyst/investor conference call, dial 1-800-633-8317
within 15 minutes of the call start time.
A SEPARATE CONFERENCE CALL FOR THE MEDIA IS SCHEDULED FOR 1:00 P.M. EASTERN
TIME TODAY.
To participate in the media conference call, dial 1-800-777-5216 within 15
minutes of the call start time.
FOR FURTHER INFORMATION CONTACT:
Jaye Snyder 612-449-8556
or
Lawrence Taylor 612-449-7076
DETERMINATION OF EXCHANGE RATIO
Pursuant to the merger with the new gaming company, Grand Casinos shareholders
will receive shares of the new gaming company determined by an exchange ratio
based upon a "valuation factor" for Grand Casinos' Mississippi casino business
and for the new gaming company's business as described below. Grand Casinos
shareholders will also receive shares in a newly formed company comprised of
Grand Casinos' Indian casino management business and various other assets,
which Grand Casinos will spin-off to its shareholders contemporaneously with
the merger.
The valuation factor used to determine the interests to be received in the new
gaming company is based on a theoretical enterprise value ($1.2 billion for
Grand Casinos and approximately $6.025 billion for the new gaming company)
minus, in each case, estimated debt as of the closing date ("net equity
value"). "Debt" is defined to include indebtedness for money borrowed,
increases in net working capital
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(excluding certain items) from year-end 1997 levels, and certain un-funded 1998
capital expenditures for projects currently underway. The actual number of
gaming company shares issuable to Grand Casinos shareholders will be determined
by the relationship between the relative net equity values of the two companies
at closing (with further adjustments in the event of increases in the
outstanding shares of the companies, other than as a result of option exercises
or conversion of Hilton preferred stock). By way of illustration, if at closing
Grand Casinos' debt is $550 million and the new gaming company's debt (pro forma
for 1999 Paris development spending) is $1.9 billion, Grand Casinos shareholders
would receive .9734 new gaming company shares for each Grand Casinos share,
representing approximately 13.6% of the combined company.
The downward adjustment in the number of new gaming company shares issuable to
Grand Casinos shareholders is limited, and no further downward adjustment will
be made if Grand Casinos' net equity value at closing drops below $617.6
million. In the event Grand Casinos' net equity value is $617.6 million or
less and the new gaming company's net equity value remains consistent with
current projections (i.e. $4.125 billion), Grand Casinos shareholders would
receive approximately 13 percent of the combined company. In the event that
the net equity value of Grand Casinos is less than $585 million, the merger
agreement may be terminated.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding Grand Casinos, Inc.'s business
which are not historical facts are "forward-looking statements" that involve
risks and uncertainties. For a discussion of such risks and uncertainties,
which could cause actual results to differ from those contained in the
forward-looking statements, see "Risk Factors" in the Company's Annual Report
or Form 10-K for the most-recently ended fiscal year.
