Red Rock Resorts to buy stock shares, pay $3-a-share dividend
Red Rock Resorts, parent company of Station Casinos, on Wednesday announced a pair of financial transactions that will return capital to its shareholders.
The company agreed to purchase a maximum of $350 million of its common stock in a “modified Dutch auction” process. It also agreed to pay a $3-per-share dividend to shareholders of record as of Nov. 23.
“We believe the announcement will be well received, as it not only shows the position of strength from a cash-flow and balance-sheet perspective, but also returns capital to shareholders, while leaving the company still well positioned to develop the pipeline,” Carlo Santarelli, a gaming analyst with the New York office of Deutsche Bank, said in a report to investors.
“We believe some will view the transaction as a closing of the door on more strategic activity from Red Rock Resorts, though we don’t necessarily believe more aggressive strategic actions were anticipated to begin with,” Santarelli wrote. “Accordingly, net-net, we view the transactions favorably and reaffirm our Buy rating.”
Under a Dutch tender, a somewhat unusual process for share transactions, a company seeks bids for the number of shares and amount an investor is willing to pay. The company then can choose the highest bid to reach the total amount of the shares to be sold, offering that price to all investors.
In a release on the transactions, Red Rock officials said, “The company also believes that the modified Dutch auction tender offer is an efficient method of providing its shareholders an opportunity to generate value with respect to some or all of their investment in the company by tendering all or a portion of their shares, if they so choose.”
In his note to investors, Santarelli calculated a possible price scenario.
“If we assume the midpoint of a range of between $49, (Tuesday) night’s close, and $53, the high end of the tender range, Red Rock would retire about 6.9 million shares, or about 6 percent of the total Class A shares outstanding and about 10 percent of the public float,” he said.
The special $3-per-share dividend is expected to be paid Dec. 22.
Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.
