FILED BY BOYD GAMING CORPORATION
PURSUANT TO RULE 425 UNDER THE
SECURITIES ACT OF 1933 AND DEEMED FILED
PURSUANT TO RULE 14A-12 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
SUBJECT COMPANY: COAST CASINOS, INC.
SUBJECT COMPANY SEC FILE NO. 000-26922
ANALYST / INVESTOR CONFERENCE CALL SCRIPT
FEBRUARY 9, 2004
ELLIS LANDAU: Thank you. Good morning everyone. We appreciate your joining us
on such short notice today. Before we begin, let me make a few comments and
announcements. Today's call may contain some forward-looking statements. We
want to let you know that the actual results may vary from what is contained in
those statements. The variances could be material and we refer you to our
public filings for the risk factors you need to know before you invest. In
addition, we're broadcasting this call on our website at BoydGaming.com, as
well as firstcallevents.com.
I would like to now turn the call over to Bill Boyd, our Chairman and CEO, who
will make a few introductory comments. Then I will return to provide you with
some financial details on the transaction, Don Snyder will then provide some
operational background, and Harlan
Braaten from Coast will have a few remarks as well. After that we will all be
available for a short question and answer session. Bill?
BILL BOYD: Thank you Ellis and good morning everyone. This is an exciting day
for us at Boyd Gaming and for our friends from Coast Casinos. As you all may
have seen this morning, we announced that our two companies have entered into a
definitive merger agreement. The
combination of Boyd and Coast will create one of the most diversified casino
companies in the country. Together, we will own and operate 17 casino
entertainment facilities, in addition to our pending acquisition of Harrah's
Shreveport, Coast's development of South Coast and a number of promising
development opportunities.
Coast casinos will operate as a wholly owned subsidiary of Boyd Gaming, under
Coast's superb existing management team led by Michael Gaughan. That is one of
the things that I personally am most pleased about.
Also, Boyd Gaming's Board of Directors will be expanded from
11 to 13 directors and under the agreement, Coast Casinos will have the right
to designate three directors to the Board, one of whom will be Michael. I look
forward to sitting shoulder to shoulder with my new colleagues as we plan the
future of our combined company.
Michael and I have known each other for nearly 40 years. Our fathers shared a
similar love for Las Vegas, which was reflected in their spirit as they helped
build this community. Our two organizations coming together is, in short, a
perfect fit. Michael and his team are some of the best operators of casino
facilities in our industry.
Coast has built a great locals business here in Las Vegas, and Don will tell
you more about that in a minute. With this merger, we believe that the sum is
greater than the parts -- together we have dedicated and hard-working
management teams and employees, great facilities and the operating knowledge
and love of the gaming and entertainment business that makes for a
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winning combination. I look forward to working alongside Michael and his team,
and believe that our shareholders will be pleased by today's announcement as
it expands our capabilities by adding one of the best brands in the business.
Now I will turn things back over to Ellis, who will walk you through the
specifics of the transaction.
ELLIS LANDAU: Thanks Bill and good morning to all of you. Today, we announced
that we have signed a definitive merger agreement, which was unanimously
approved by the Boards of both companies.
As Bill said, under the terms of the agreement, Coast will become a wholly
owned subsidiary of Boyd Gaming, positioned as a separate operating unit run by
Michael Gaughan and the current Coast management team.
The total merger consideration is approximately $1.3 billion:
- On a fully-diluted basis, Coast shareholders will receive approximately
$495 million in cash
- Boyd Gaming will also issue approximately 19.4 million shares to Coast
shareholders. Using the ten-day average of our closing stock price for the
period ended February 5, the stock portion of the transaction is valued at
approximately $325 million.
- Boyd will also assume approximately $460 million of Coast debt.
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The transaction is immediately accretive to Boyd's earnings per share. We are
valuing this merger at approximately 7.4 times Coast's estimated 2004 EBITDA.
We are also estimating that, on a pro forma basis, the two companies' revenues
would be approximately $2.0 billion this year.
Since Coast is not a publicly traded company, some of you may not be familiar
with them. Let me tell you, this is a very well managed company with some
impressive results. Over the past five years, Coast has grown EBITDA at a
19.6% compound annual growth rate, while consistently increasing its EBITDA
margins.
We expect this transaction to be funded with a combination of a new bank
facility and the issuance of notes in the public market. We also expect Boyd's
three public note issues to remain outstanding.
One of the key drivers of this transaction is the fact that the combined
company will enjoy a leading position in the Las Vegas locals sector.
This sector is estimated to be about $2 billion a year and growing. Don will
give you some more color about why this is such an attractive opportunity and
how we believe today's announcement will help us take advantage of the economic
and population growth that we are seeing here.
This transaction is subject to approval of both companies' shareholders. Coast
shareholders, representing approximately 56 % of the voting power of Coast
shares, have agreed to vote their shares in favor of this merger and against
any other combination for a period of two years. We also will seek gaming,
government and regulatory approvals. The transaction is expected to be
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completed immediately upon receipt of necessary third party approvals, all of
which the Company expects to receive by mid-2004.
Let me now turn it over to Don Snyder, who will provide some additional
operational perspective on this combination.
DON SNYDER: Thanks Ellis and good morning to all of you. I want to spend a
few minutes explaining why we are so excited about today's news. In Coast
Casinos, Boyd Gaming has found a partner that brings not only similar corporate
values, but exceptional operating expertise and a portfolio of facilities that
reflect the deep level of knowledge about the Las Vegas locals sector.
Together, this combination creates one of the most diversified casino companies
in the country. The combined Boyd Gaming will have a total of 17 casino
entertainment facilities, as well as our pending acquisition of Harrah's
Shreveport and Coast's development of South Coast. Construction of South Coast
is expected to begin in the second quarter of this year.
Our successful Sam's Town property, a long-time Las Vegas locals landmark, will
join Coast's three successful local properties, Gold Coast, Suncoast and the
recently expanded Orleans. This creates a significant presence in the dynamic
and growing Las Vegas locals sector. In addition, Coast is about to begin
development of its South Coast facility, which is located in the growing
residential sector south of Las Vegas. The combined company will also have two
properties well positioned on the Las Vegas strip, Coast's Barbary Coast and
Boyd's Stardust.
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This means that after the merger, the combined Boyd Gaming will generate about
half of its pro forma EBITDA from the state of Nevada. This is significant
given the stable regulatory and tax environment here.
Las Vegas is one of the fastest-growing communities in the country with a
population that increased 4% last year. There are a number of other economic
indicators that support why this is such a good opportunity for us: for 2003,
total employment increased 3%; personal income increased 5% and new home
permits were up a whopping 18%. Together we are excited to build upon our
position in the Las Vegas locals sector.
For Coast, they will become part of an organization with expanded geographical
diversity, as we are a significant operator in four states in the Midwest and
South. We also recently announced that we will begin planning an expansion of
Borgata, our new, dramatic destination resort in Atlantic City that we own with
MGM Mirage. The Borgata has been a top performer in Atlantic City, as we
discussed on last week's earnings call.
Now, I would like to introduce Harlan Braaten, who will say a few words, and
then we will go to a short Q&A.
HARLAN BRAATEN: Thank you so much for the chance to speak with you this
morning. This is a very exciting day for all of us at Coast Casinos. Michael
asked me to express that he is very
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pleased with today's announcement, and if it weren't for an unbreakable prior
commitment, he would be with us today.
We believe that this is a natural fit and that our two companies share similar
values and commitment to this industry. All of us in the Coast management team
have great respect for Boyd Gaming and their executives. And that respect has
only grown as we have gone through the negotiations for this transaction.
We believe that this is the right transaction at the right time for Coast and
for all our employees. They will benefit from being part of a strong, more
diversified organization.
The Coast management team is looking forward to working with Boyd as we plan
the future of our combined company.
Michael's father, Jackie, and Bill's father, Sam Boyd, worked together in Las
Vegas nearly fifty years ago and we are delighted to have Bill Boyd and Michael
bring their teams together at this time. With that, I will hand things back to
Ellis.
ELLIS LANDAU: Thank you Harlen and I look forward to working with you and your
colleagues in the years to come. All of us at Boyd Gaming believe that this
merger brings our growth strategy into clear focus and will allow shareholders
of both companies to participate in the upside potential of one of the most
diversified gaming companies in the industry.
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We will now open up the call for your questions.
# # #
IMPORTANT LEGAL INFORMATION
THIS PRESENTATION IS NOT AN OFFER TO SELL THE SECURITIES OF BOYD GAMING
CORPORATION AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The joint proxy
statement/prospectus will be filed with the U.S. Securities and Exchange
Commission by Boyd Gaming Corporation and Coast Casinos, Inc. Investors and
security holders may obtain a free copy of the joint proxy statement/prospectus
when it becomes available and other documents filed or furnished by Boyd Gaming
Corporation or Coast Casinos, Inc. with the SEC at the SEC's website at
www.sec.gov. The joint proxy statement/prospectus and other documents filed or
furnished by Boyd Gaming Corporation or Coast Casinos, Inc. may also be
obtained for free by directing a request to Boyd Gaming Corporation, Attn: Rob
Stillwell, Investor Relations, 2950 Industrial Road, Las Vegas, NV 89109 or to
Coast Casinos, Inc., Attn: Gage Parrish, 4500 West Tropicana Avenue, Las Vegas,
NV 89103.
Boyd Gaming, Coast Casinos and their respective officers and directors may be
deemed to be participants in the solicitation of proxies with respect to the
transactions contemplated by the merger agreement. Information about the
participants in the solicitation will be set forth in the joint proxy
statement/prospectus to be filed with the SEC.
CAUTION CONCERNING FORWARDING-LOOKING STATEMENTS: This presentation contains
certain "forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements are based on
management's current expectations and are naturally subject to uncertainty and
changes in circumstances. Actual results may vary materially from the
expectations contained herein. The forward-looking statements contained herein
include statements about the proposed transaction. The following factors,
among others, could cause actual results to differ materially from those
described herein: failure to obtain certain regulatory approvals; actions of
the federal and local governments; failure of the requisite number of Boyd
Gaming Corporation or Coast Casinos, Inc. stockholders to approve the proposed
transaction; the inability to successfully integrate the businesses of Boyd
Gaming Corporation and Coast Casinos, Inc.; the costs related to the merger;
the inability to achieve cost-cutting synergies resulting from the merger;
changing consumer or marketplace trends; the general economic environment;
potential or actual litigation; and other economic, business, competitive
and/or regulatory factors affecting businesses generally. More detailed
information about those factors is set forth in filings made by Boyd Gaming
Corporation and Coast Casinos, Inc. with the SEC. Neither Boyd Gaming
Corporation nor Coast Casinos, Inc. is under any obligation to (and expressly
disclaims any such obligation to) update or alter its forward-looking
statements whether as a result of new information, future events or otherwise.