Huge Casino Profits Fuel French Lick Financial Argument

The new French Lick gambling casino and resort is predicted to make over $120 million dollars in it's first year, with over $30 million of that going to state and local governments. The debate over those numbers is what has the Cook Group and Lauth Property Group wrestling for control over the French Lick deal.

By 2011, gambling revenue would grow to $136 million, according to figures released by the Indiana Gaming Commission. The numbers come from a forecast made for the companies by The Innovation Group, a national casino consulting firm, in November 2005.

Last June, the Lauth Group offered Cook $200 million for its 1/2 of the gambling casino site and Cook to offer Lauth $5 million for it's stake. Lauth officials expect the resort to create cash flow in the $70 million a year range. But Cook officials say industry norms would put the figure at $40 million to $45 million a year.

Cash flow, which is a business' profits less debt interest, taxes, depreciation and amortization, is a figure used to determine the overall value of a business entity. Gambling casinos recently sold at prices that are 8.5 to 9.1 times higher than annual cash flow, both Cook and Lauth agree.

So by Lauth's estimation, the casino gambling resort is worth about $620 million. But by Cook's math, it's worth $340 million to $410 million. Both values must be reduced by the $270 million the partners owe to bondholders. And subtract somewhere from $50 million to $62 million for the money Cook spent to buy the West Baden Springs and French Lick Springs hotels.

By Lauth's math, it should pay Cook $150 million for their share, plus the cash for the hotels, for a total of at least $200 million. In Cook's view, Lauth's stake is worth at most $45 million and as little as $4 million.

August 22, 2006
Posted By Larry Rutherford
Staff Editor, CasinoGamblingWeb.com    Previous Page | Internet Gambling | Top Online Casinos | Submit News!