After Microsoft's $6 billion buyout of aQuantive handed our Rule Breakers subscribers a 150% gain in five months, I'm as much of a fan of acquisitions as anyone. But why would anyone want to buy Trump Entertainment (NASDAQ:TRMP)?
Apparently, someone does. From a press release issued Thursday after market close:
"[Trump] has recently received preliminary and conditional indications of interest from parties proposing to acquire the Company. There can be no assurance that any of these indications of interest will result in a sale of the Company or any other transactions."
And someday, maybe, in the not-too-distant future, I'll be a guest host on The Apprentice.
Oh, wait. Trump just quit the full-contact business "reality" series that had run for six seasons on General Electric (NYSE:GE) subsidiary NBC.
But I digress. Shares of Trump Entertainment, which emerged from bankruptcy two years ago, surged 21% after the press release hit the news wires, suggesting that investors believe a deal really is in the works.
I suppose it's possible. Private-equity funds are flush with cash and, as of today, an outright purchase of Trump's casino operations would run $1.81 billion, with assumed debt accounting for all but $486 million of that total.
But would anyone want to buy Trump's casino empire? That depends. On the one hand, Trump's Atlantic City holdings sit on some prime real estate that has attracted investment from a variety of sources, including Trump's top investor, Morgan Stanley (NYSE:MS).
On the other, there's Trump the man. When the company first faced the possibility of bankruptcy proceedings in 2004, there was talk of Trump stepping down as CEO. But, alas, he couldn't let go.
Perhaps that was due to the sweet redevelopment rights his private contracting business, The Trump Organization, retained during the recapitalization? The Donald arranged it so that he could be the primary developer for his Atlantic City casinos.
Let's be clear: We don't know whether Trump Entertainment is borrowing to finance a Trump-led construction project at the Taj Mahal. But, be honest, would you be surprised if it were?
That's why I think potential acquirers will tread carefully. Notice the phrasing of the press release. So far, offers are "preliminary" and, more importantly, "conditional."
Besides, even if Trump Entertainment could restructure its debt and get a good price for its salable assets in a going-private transaction, the end result -- more losses, for many more years -- seems inevitable so long as Trump remains at the top.
But he will, because Trump has a history of trusting no one but himself. For bad and, here especially, for worse. Even the greediest private-equity buyer has to realize that.
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Fool contributor Tim Beyers, who is ranked 6,267 out of more than 29,000 rated players in our Motley Fool CAPS investor-intelligence database, has shorted Trump in CAPS and owned shares of aQuantive at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on Foolishness and investing may be found in his blog. The Motley Fool's disclosure policy cleaned up at the high-roller lounge at the Taj over the weekend.
