Red Rock Resorts buys back 6.9 million shares for $354M

Station Casinos parent company Red Rock Resorts is buying back 6.9 million shares from shareholders for $51.50 a share as part of a “modified Dutch auction” process that concluded Thursday, according to a Securities and Exchange Commission filing from last Friday.

The tender offer expired at 12:00 midnight at the end of December 9, 2021. Based on the final count by depositary for the tender American Stock Transfer & Trust Company, a total of 6,884,858 shares of Class A Common Stock were properly tendered.

Under a Dutch tender, a fairly unusual process for share transactions, a company seeks bids for the number of shares and amount an investor is willing to pay. The business can then choose the highest bid to reach the total amount of the shares sold, offering that price to all investors.

The aggregate of shares accepted for purchase represents approximately 10.08% of the shares issued and outstanding, at an aggregate cost of approximately $354.6 million, excluding fees and expenses related to the tender offer.

BofA Securities acted as dealer manager for the tender offer, while D.F. King & Co acted as information agent. The move is expected to improve the company’s balance sheet, as it prepares to build its $750 million casino project in southwest Las Vegas on Durango Drive.

Red Rock Resorts first announced the financial transaction last month. On November 10, the company announced it intended to buy back about $350 million in shares as well as pay a $3-per-share dividend to shareholders of record as of November 23.

Analysts said at the time the announcement was welcome news, as it not only showed a strong cash flow and balance sheet, but also returned capital to shareholders “while leaving the company still well-positioned” to develop the pipeline, Carlo Santarelli, an analyst with the New York office of Deutsche Bank, said in a report to investors retrieved by Las Vegas Review-Journal.

“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,” Red Rock officials explained in a release on the transactions.

Red Rock Resorts is now set on developing the Durango Drive casino resort, expected to break ground in Q1 2022. To cost about $750 million, the venue could take 18 to 24 months to complete and will cover 533,000 square feet, 73,000 of which will belong to casino space.

The venue will have 2,000 slot machines and 46 table games. A hotel with 200 rooms and suites will be developed, plus 21,000 square feet of convention and meeting space. Four food and beverage outlets and a state-of-the-art sportsbook will also be among the amenities.