Exhibit 99.2
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TBR ACQUISITION GROUP, LLC
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
November 3, 0000
Xxxxx xx Xxxxxxxxx
XXX Gaming Group, Inc.
Xxxxx Xxxxx 0 Xxxxx
X.X. Xxx 000
Xxxxxxx, Xxxx Xxxxxxxx 00000
Ladies and Gentlemen:
TBR Acquisition Group, LLC (the "Acquisition LLC"), a Delaware limited
liability company recently formed by Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxx, and
Xxxxxx X. Xxxxx (together with the Acquisition LLC, the "Purchasers"), is
pleased to submit the following proposal whereby the Acquisition LLC would
acquire all of the issued and outstanding shares of common stock of MTR Gaming
Group, Inc. (the "Company") not already owned by the Purchasers or their
affiliates for a price of Nine Dollars ($9.00) per share in cash. This proposal
provides the Company's shareholders with a greater than thirty-three percent
(33%) premium over yesterday's closing price of Six Dollars and Seventy Three
Cents ($6.73) per share and a greater than twenty-five percent (25%) premium
over the average closing price per share for the last thirty (30) trading days.
The Purchasers' interest in acquiring the Company follows extensive
efforts by the Company to create and capture shareholder value. As you are
aware, the Company engaged two (2) financial advisors in connection with a
potential sale of the Company. These financial advisors contacted over twenty
three (23) of the most likely prospective buyers of the Company to determine
their level of interest in acquiring the Company and contacted numerous other
parties to determine their level of interest in acquiring certain of the
Company's core properties. In response to such inquiries, the Company received
nominal first round indications of interest from the contacted parties and only
one such contacted party submitted a final round bid (which bid was for an all
stock transaction). Following receipt of this sole final round bid, the
Company's financial advisors continued to solicit inquiries from potential
interested parties and pursued further discussions with the party that submitted
the final round bid, however, they were unable to obtain any additional bids and
discussions with the sole final round bidder have not progressed.
The financial advisors attributed the lack of interest in the Company
to several factors which could materially and adversely impact the Company's
operations and future prospects including, without limitation, (i) the increased
competition that is likely to result from the expansion of the gaming industry
in Pennsylvania, (ii) uncertainty as to if, or when, table games legislation
would be passed in West Virginia, (iii) increased competition from local video
lottery facilities in West Virginia, and (iv) uncertainty as to the timing of
the Company's other growth opportunities.
The continuing competitive pressures on the Company's operating
incomes and earnings (which declined on a year over year basis for the quarterly
period ended June 30, 2005, and continue to face pressure through the quarterly
period ended September 30, 2005), as well as the failure of the special session
of the West Virginia legislature to enact any favorable table games legislation,
has resulted in increased pressure on the Company's stock price which has
declined from Eight Dollars and Eighty Nine Cents ($8.89) per share prior to the
start of the West Virginia legislative session on September 7, 2005 to
yesterday's closing price of Six Dollars and Seventy Three Cents ($6.73).
The Purchasers propose the following two-step transaction: a first
step public tender offer for not less than ninety percent (90%) of the Company's
issued and outstanding shares of common stock for Nine Dollars ($9.00) per share
in cash, followed by a second step short form merger under Delaware law whereby
the Acquisition LLC (or an affiliate thereof) would be merged with and into the
Company and the Acquisition LLC would acquire the remaining outstanding shares
of common stock of the Company (other than certain shares held by the
Purchasers) for Nine Dollars ($9.00) per share in cash. The Purchasers reserve
the right to modify the structure of the proposed transaction to the extent
necessary based on discussions with the Committee and the advice of Purchasers'
counsel.
Based upon preliminary discussions with Jefferies & Company, Inc.
("Jefferies"), the Purchasers are confident that Jefferies would be in a
position to provide financing for the proposed transaction on terms acceptable
to the Purchasers. Therefore, it is the Purchasers' intent to negotiate with
Jefferies for a financing commitment. However, Jefferies has advised the
Purchasers that they will require the consent of the Company if they are to
provide such financing in connection with the proposed transaction.
The Purchasers believe that the proposal is fair to, and in the best
interests of, the Company and its shareholders based upon the cash premium to be
paid by the Purchasers and the risks and pressures facing the Company, as
described above.
Given the Purchasers' involvement with the Company, the Purchasers
anticipate that the Board of Directors of the Company will form a special
committee of independent directors (the "Committee") to respond to this proposal
on behalf of the Company's shareholders. The Purchasers encourage the Committee
to retain its own legal and financial advisors to assist in its review of the
proposed transaction.
Please be advised that the Purchasers do not intend to pursue this
proposal without the approval of the Committee. The Purchasers would welcome the
opportunity to present this proposal in more detail to the Committee and answer
any questions that the Committee may have.
The Purchasers look forward to entering into a letter of intent with
the Company as soon as practicable, which letter of intent shall be non-binding,
except for certain binding provisions including, for example, a reasonable
exclusivity period in favor of the Purchasers and provisions providing for the
payment by the Company of a break up fee to the Purchasers and the reimbursement
of the Purchasers' expenses in the event the Company elects to proceed with a
superior priced proposal. Following execution of the letter of intent, the
Purchasers will be prepared to promptly provide the Committee and its legal and
financial advisors with draft agreements documenting the proposed transaction
and to expeditiously negotiate definitive forms of such agreements that would
contain customary terms and conditions for transactions of this type including,
without limitation, the following closing conditions:
o Approval of the proposed transaction by all applicable regulatory
authorities;
o Receipt by the Purchasers of the financing;
o Approval of the proposed transaction by the Committee;
o Receipt by the Committee of a fairness opinion from its financial
advisors; and
o Recommendation by the Board of Directors of the Company that the
shareholders of the Company tender their shares to the Acquisition LLC.
Neither the Company, on the one hand, nor the Purchasers, on the
other, will have any legal obligation relating to the proposed transaction until
mutually satisfactory definitive agreements have been executed by all parties
(except with respect to those binding provisions of the letter of intent).
Should a transaction be consummated, we presently intend to continue
the business of the Company as currently conducted, and do not anticipate making
any material changes in the Company's current operations as a result of the
transaction.
This letter is merely a statement of our current intention and does
not constitute a firm or binding offer.
We reserve the right to amend or withdraw this proposal and to
terminate further discussions at any time prior to the execution of definitive
agreements.
Please let us know at your earliest convenience how you wish to
proceed. We look forward to hearing back from you with respect to this
significant opportunity for the Company and its shareholders.
Very truly yours,
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Managing Member
