Colony Capital LLC Free To Look For New BuyerPublished on May 19th, 2013 1:33 pm EST
The Rational Group (parent company of Pokerstars) received some bad news earlier this week when a New Jersey state judge ruled that Colony Capital LLC was free to continue to try and find a new buyer for the Atlantic Club casino.
The Rational Group had initially secured a temporary restraining order to stop Colony Capital LLC from shopping the casino around, but the Atlantic Club is now on the market once again.
The Rational Group was attempting to purchase the Atlantic Club as a way of gaining a foothold into the opening New Jersey online gaming market. New Jersey's recently signed online gaming bill allows Atlantic City casinos to offer online gaming to the people of New Jersey.
The purchase contract between Colony Capital LLC (the owner of the Atlantic Club) and the Rational Group had a clause that said that the deal would be terminated by the end of April if the Rational Group hadn't secured an interim casino license by that time. New Jersey gaming regulators announced that it they likely wouldn't have a decision on the application until the summer, which meant that the April 26th date came and went without the Rational Group receiving their interim license.
Once April 26th passed, Colony Capital LLC considered their deal with the Rational Group dead and started looking for another buyer. The Rational Group disagreed and sought a temporary restraining order.
Well, a judge ruled against the Rational Group this past week, which means that the Atlantic Club is now on the market once again.
This is a big blow to the Rational Group, as they sunk over $10 million into keeping the Atlantic Club afloat while they tried to secure their license. This money is gone.
In addition, Colony Capital LLC believes that they are entitled to a $4 million termination fee from the Rational Group - the two sides will likely go to court over this as well.
So, in total, the Rational Group could be out a total of $15 million and have absolutely nothing to show for it. The original purchase price for the casino was $15 million, plus the assumption of certain liabilities.
This deal started to go south when the American Gaming Association (AGA) filed their opposition to Pokerstars' interim casino license application in March. The AGA, which counts many large casino companies as members, argued that Pokerstars operated as a criminal enterprise for many years and should be denied a license.
New Jersey gaming regulators would eventually decide that they would need an extra couple of months to decide on the Rational Group application, and this eventually led to the deal for the Atlantic Club being scuttled.
It will be interesting to see what the Rational Group does next.
Will they make another bid for the Atlantic Club? Will they focus their efforts on another property? Will they abandon their efforts to enter the New Jersey market altogether?
One thing is for sure - Pokerstars is likely going to have to fight tooth and nail to enter any US market.
Source: WSJ.com - Pokerstars Dealt Setback in Bid to Enter U.S. Market
Filed Under: Poker Legal Issues