THE WINNER'S CURSE, PART III: DUMB ACQUISITIONS AND FORMER CEO'S

(previously posted under Keith McCullough: 06/09/08 2:21 PM EST)


The Winner's Curse strikes again after another CEO was forced out following a disastrous casino acquisition. William J. Yung III stepped down as CEO of Tropicana Entertainment after pressure from bondholders.

Recall that Columbia Sussex, with Mr. Yung at the helm, won the bidding war for Aztar Corporation (owner of the 2 Tropicana casinos) in 2006 with its top tick 12x EV/EBITDA multiple offer. By the way, the AC Trop performance has been disastrous since the acquisition so 12x is not even reflective of how much they overpaid. EBITDA declined 15% in 2007 and 20% in Q1 2008. No surprise Tropicana recently filed for Chapter 11 protection.

The good news is that, at least in US Gaming, CEO's like John Bushy of ASCA and Mr. Yung are being held accountable for outrageous value destruction.