Tag Archives: UWN

Nevada Gold & Casinos merger arbitrage

Last month Nevada Gold & Casinos (AMEX:UWN) announced that it had struck a deal to be acquired at $2.50/share, subject to certain minor adjustments. The company operates 9 mini-casino’s in Washington, approximately 604 slot machines in 15 locations in Deadwood, South Dakota and one casino in Henderson, Nevada. This last location is under contract to be sold, and is the cause of the possible adjustments in the $2.50/share merger consideration. Based on working capital of the Nevada business at the time of the sale there is a possible adjustment to the merger consideration. Because this adjustment is expected to be minor to begin with, and can both be positive and negative, I think we can safely ignore it since I think it should have a more or less neutral expected value.

With the stock currently trading at $2.39 there is a potential upside of 4.6% which would translate to a 19.8% internal rate of return if the deal closes, as scheduled, before the end of the year. And with the stock trading at $2.15 before Nevada Gold & Casinos announced that they were in discussions to be acquired the likely downside in case the deal breaks is probably limited. Add that there is no financing condition, and stockholder approval and regulatory approval shouldn’t be an issue either, I think it’s an attractive deal. As a small sweetener, the merger consideration will be increased by $0.01/month if the merger is completed after February 1, 2019. I don’t think that will happen, but if things get delayed for some reason it’s nice to get paid while waiting for the deal to be consummated.

Disclosure

Long Nevada Gold & Casinos