Rick's Cabaret International, Inc. (NASDAQ: RICK), VCG
Holding Corp. (NASDAQ: VCGH) and Troy Lowrie and his affiliates
have signed a letter of intent under which Rick's Cabaret will
acquire all of the outstanding shares of VCG Holding to form the
largest publicly traded operator of upscale gentlemen's clubs in
North America, the two companies announced today.
Rick's Cabaret currently operates 18 nightclubs in seven states
while VCG Holding operates 20 clubs in ten states. The two
companies had combined revenues of $131.3 million for the 12 month
period ending September 30, 2009.
Eric Langan, President and CEO of Rick's Cabaret
International, said: "The combination of these two companies will
result in a powerful operator that we believe would have generated
earnings before income tax and depreciation (EBITDA) for the 12
months ended September 30, 2009 of approximately $25.3 million
without any of the add-backs we anticipate we will achieve through
synergistic cost savings. I am confident that the combined entities
can achieve meaningful savings through streamlined management and
elimination of duplicate costs associated with being two separate
public companies, including lower legal and accounting
expenses."
Troy Lowrie, Chairman and Chief Executive Officer of VCG
Holding Corp., said: "We at VCG are very pleased that this merger
will create the leading adult entertainment nightclub operator in
the United States. There are significant similarities in the
companies' cultures and capabilities, and this should ultimately be
a great combination for our shareholders, customers, and employees.
We believe that the combined company will be better positioned to
generate strong financial results and capitalize on future growth
opportunities."
Rick's Cabaret International currently operates clubs under the
Rick's Cabaret brand in New York City, Las Vegas, Houston, Ft.
Worth, Austin, Minneapolis and San Antonio; under the Tootsie's
Cabaret brand in Miami; under the XTC Cabaret brand in Austin,
Dallas, Houston (two clubs) and San Antonio; under the Club Onyx
brand in Houston, Charlotte, Dallas and Philadelphia; and under
Cabaret North in Ft. Worth. A Rick's Cabaret in Austin that had
been closed temporarily is scheduled to re-open under a new concept
next month.
VCG Holding operates Imperial Showgirls in Anaheim; Diamond
Cabaret, La Boheme, The Penthouse Club, PT's Showclub, PT's All
Nude, all in Denver; PT's Showclub in Colorado Springs, Portland
Maine, Louisville and Miami; The Men's Club in Raleigh; PT's
Brooklyn, PT's Centreville, PT's Sports, The Penthouse Club and
Roxy's, all in East Saint Louis, Illinois; Jaguars in Dallas;
Jaguars in Ft. Worth; PT's Showclub in Indianapolis; and Schieks
Palace Royale in Minneapolis.
"The addition of the PT's Showclub brand and the opportunity to
re-brand certain VCG Holding properties as Rick's Cabaret will be a
great enhancement to our portfolio," Mr. Langan said. "Troy Lowrie
has built a terrific organization that we expect will fit nicely
with ours, giving us new strength in the Midwest and Western states
in particular and added market strength in key areas where we both
now operate competitively. We are pleased that Troy has agreed to
stay on as a consultant."
Under the non-binding (except as to certain provisions,
including exclusivity and confidentiality) letter of intent, the
companies anticipate a potential merger (structured to qualify as a
tax-free reorganization), in which VCG Holding's shareholders will
receive shares of Rick's common stock based on certain exchange
ratios valuing each share of VCG Holding's common stock between
$2.20 and $3.80 per share, determined based on the weighted average
closing price of Rick's common stock as traded on the Nasdaq Global
Market for the 20 consecutive trading days ending on the second
trading day prior to the closing of the Merger. As of February 16,
2010 (and assuming the potential merger were to close on such date
and that the weighted average closing price per share of Rick's
common stock for the 20 consecutive trading days ending on February
11, 2010 was equal to the closing price of Rick's common stock on
February 11, 2010 of $11.76 per share), the value of each share of
VCG Holding's common stock under this formula would be $2.66 per
share. In the event the price per share of Rick's common stock as
determined by this formula is below $8.00, Rick's may terminate the
merger agreement, subject to the payment to VCG Holding of a
termination fee to be negotiated by the parties in connection with
the preparation of the merger agreement.
Contemporaneously with the merger, Rick's will acquire 5,770,197
shares of VCG Holding common stock held by Troy Lowrie and his
affiliates, for cash in an amount equal to the lesser of $2.44 per
share or the per share price of common stock received by VCG
Holding's shareholders in the proposed merger. Mr. Lowrie may elect
to receive shares of Rick's common stock at the same exchange rate
received by VCG Holding's shareholders, for up to 30% of his VCG
Holding common stock. In addition, in exchange for additional
payments to be made to Mr. Lowrie as detailed in the letter of
intent, Mr. Lowrie will refinance (at a lower interest rate) and
continue to carry a $5.7 million note from VCG Holding (as acquired
by Rick's), continue to personally guarantee certain VCG Holding's
obligations in exchange for a fair market value cash payment for
such guarantees, sell to Rick's the outstanding capital stock of
Club Licensing, Inc., a subsidiary of Lowrie Management, LLLP, sell
to Rick's the trademarks "Diamond Cabaret" and "PT's," and enter
into a three-year consulting agreement with Rick's.
The Letter of Intent also provides for an exclusivity period
through March 12, 2010, during which time VCG Holding and its
representatives agree to negotiate exclusively with Rick's, subject
to termination and a termination fee payable to Rick's upon VCG
Holding's receipt of a "superior proposal" to acquire 20% or more
of VCG Holding, by way of a sale of assets, tender offer, merger,
consolidation or other business combination, that in the opinion of
VCG Holding's financial advisor, is, or is reasonably likely to
lead to, a proposal that is more favorable to the shareholders of
VCG Holding than the proposed merger. If definitive merger
documents are not entered into as of such date, the letter of
intent will terminate, unless otherwise extended by the parties.
Under the letter of intent, the merger agreement is expected to
contain customary representations and warranties including the
absence of a material adverse change of Rick's and VCG Holding and
other customary closing conditions, including but not limited to,
the receipt of material consents, the approval of the merger by the
shareholders of Rick's and of VCG Holding, and the effectiveness of
a registration statement containing a joint proxy
statement/prospectus filed with the Securities and Exchange
Commission (the "SEC") on Form S-4 to be filed by Rick's, which,
among other things, registers the shares of Rick's common stock to
be issued to VCG Holding's shareholders in the merger. There can be
no assurance that Rick's and VCG Holding will enter into any
definitive transaction agreement, that the entry into a transaction
agreement, if any, will result in the closing of any specific
transactions, or that the terms of any definitive transaction
documents will reflect the terms of the proposed merger as outlined
in the letter of intent. A copy of the Letter of Intent has been
filed on Form 8-K filed by both companies today with the Securities
and Exchange Commission (the "SEC"). The definitive merger
agreement, if consummated, will include final terms and conditions
of the proposed transaction negotiated by the parties, and will be
disclosed upon execution.
Additional Information and Where to Find It
In connection with the proposed merger, Rick's Cabaret
International, Inc. ("Ricks") and VCG Holding Corp. ("VCG Holding")
intend to file documents relating to the transaction with the SEC,
including a registration statement containing a joint proxy
statement/prospectus on Form S-4 to be filed by Rick's.
Investors are urged to read the joint proxy statement/prospectus
regarding the proposed merger, if and when it becomes available,
because it will contain important information. When it becomes
available, shareholders and other investors will be able to obtain
a free copy of the joint proxy statement/prospectus, and are able
to obtain free copies of other filings and furnished materials
containing information about Rick's and VCG Holding at the SEC's
internet website at www.sec.gov. Copies of the joint proxy
statement/prospectus, when it becomes available, and any SEC
filings incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by
directing a request to Rick's Cabaret International, Inc., 10959
Cutten Road, Houston, Texas, 77066, telephone (281) 397-6730,
Attention: Phil Marshall, or to VCG Holding Corp., 390 Union
Boulevard, Suite 540, Lakewood, Colorado 80228, telephone (303)
934-2424, Attention: Courtney Cowgill.
Interests of Participants in the Solicitation of
Proxies
Each of the Rick's and VCG Holding and their respective
directors and executive officers may be deemed to be "participants"
in the solicitation of proxies in respect of the proposed
transaction under SEC rules. Information regarding Rick's directors
and executive officers is available in its definitive proxy
statement on Schedule 14A filed with the SEC on July 7, 2009 and in
its annual report on Form 10-K filed with the SEC on December 17,
2009 and information regarding VCG Holding's directors and
executive officers is available in its definitive proxy statement
on Schedule 14A filed with the SEC on April 30, 2009. Copies of
these documents can be obtained, without charge, at the SEC's
internet website at www.sec.gov or by directing a request to the
Rick's or VCG Holding, as applicable, at the addresses above. Other
information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the joint
proxy statement/prospectus and other relevant materials to be filed
with the SEC when they become available.
Forward Looking Statements
Certain statements contained in this press release regarding
Rick's and VCG Holding's future operating results or performance or
business plans or prospects and any other statements not
constituting historical fact are "forward-looking statements"
subject to the safe harbor created by the Private Securities
Litigation reform Act of 1995. Where possible, the words "believe,"
"expect," "anticipate," "intent," "would," "will," "planned,"
"estimated," "potential," "goal," "outlook," and similar
expressions, as they relate to either company or their management
have been used to identify such forward-looking statements. All
forward-looking statements reflect only current beliefs and
assumptions with respect to future business plans, prospects,
decisions and results, and are based on information currently
available to the companies. Accordingly, the statements are subject
to significant risks, uncertainties and contingencies, which could
cause the companies' actual operating results, performance or
business plans or prospects to differ materially from those
expressed in, or implied by, these statements. Such risks,
uncertainties and contingencies include, but are not limited to,
statements about the benefits of the merger, including future
financial and operating results, the companies' plans, objectives
and expectations and other intentions and other statements that are
not historical facts. The following factors, among others, could
cause actual results to differ from those set forth in the
forward-looking statements: (1) the risk of the failure of the
companies' shareholders to approve the merger; (2) the risk that
the businesses would not be integrated successfully; (3) the risk
that the cost savings and any revenue synergies from the merger may
not be fully realized or may take longer to realize than expected;
(4) the risk that Rick's applicable average trailing twenty day
average stock price per share may not equal or exceed $8.00
pursuant to the formula in the merger agreement; (5) the applicable
disruption from the merger may make it more difficult to maintain
relationships with customers, employees ore suppliers; and general
economic conditions and uncertainties or consumer sentiment in the
companies' markets. Additional factors that could cause the
companies' results to differ materially from those described in the
forward-looking statements are described in Rick's annual report on
Form 10-K filed with the SEC December, 17, 2009 and VCG Holding's
annual report on Form 10-K, as amended, filed with the SEC June 10,
2009, and Rick's and VCG Holding's other periodic and current
reports filed with the SEC from time to time and available on the
SEC's internet website at www.sec.gov. Unless required by law,
neither Rick's nor VCG Holding undertakes any obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events, or otherwise.
About Rick's Cabaret:
Rick's Cabaret International, Inc. (NASDAQ: RICK) is home to
upscale adult nightclubs serving primarily businessmen and
professionals that offer live entertainment, dining and bar
operations. Nightclubs in New York City, Miami, Philadelphia, New
Orleans, Charlotte, Dallas, Houston, Minneapolis and other cities
operate under the names "Rick's Cabaret," "XTC," "Club Onyx" and
"Tootsie's Cabaret". Sexual contact is not permitted at these
locations. Rick's Cabaret also operates a media division, ED
Publications, and owns the adult internet membership website
couplestouch.com as well as a network of online adult auction sites
under the flagship URL naughtybids.com. Rick's Cabaret common stock
is traded on NASDAQ under the symbol RICK. For further information
contact ir@ricks.com.
About VCG Holding Corp.:
VCG Holding Corp. is an owner, operator, and consolidator of
adult nightclubs throughout the United States. The Company
currently owns 20 adult nightclubs located in Anaheim,
Indianapolis, St. Louis, Denver, Colorado Springs, Ft. Worth,
Dallas, Raleigh, Minneapolis, Louisville, Miami, and Portland, ME.
For further information visit vcgh.com.
Photos/Multimedia Gallery Available:
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