M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Tuesday, July 3, 2007

Trump's Shareholders Lose Again

Trump Entertainment Resorts, Inc. yesterday announced a failed sale process. For those ever in the same unenviable situation, here is the 8-K disclosure for your files:

On July 2, 2007, the Company issued a press release announcing that the Company’s Board of Directors has concluded, after consulting with its financial advisor, that none of the indications of interest received to date represented or was likely to lead to a transaction that was in the best interests of the Company and its shareholders. There are currently no ongoing discussions with the parties that submitted the indications of interest. The Company will continue to review other strategic corporate options with a view towards maximizing value for the Company’s shareholders.

It all started on March 12 when Trump announced that it had engaged "Merrill Lynch to assist the Company in the identification and evaluation of strategic corporate options including, but not limited to, capital structure, financing and value-creation alternatives."  The stock subsequently rose on the hopes of a sale, but on yesterday's news, the company's stock fell almost 16% in trading.  But such losses are nothing new for Trump's stockholders.  These casino properties have been in and out of bankruptcy several times including most recently in 2004.  Still Donald Trump, has remained with the company throughout this entire period and is now Chairman of the board.  And according to the company's proxy statement was paid over $1.878 million dollars last year for his services.  Corporate governance gurus take note. 

Still, the company's initial and subsequent disclosure here appears to have been correct under the securities laws.  This is particularly true since its predecessor company, Trump Hotels & Casino Resorts was the subject of a landmark SEC cease-and-desist order for violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder for misleading disclosure with respect to pro forma financial statements.  Still, the disclosure highlights the boiler-plate warning for shareholders that when these initial announcements are made there are no assurances that an agreement will be reached for a transaction.  This type of speculation is better left to the M&A arbs. 


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