Internet Porn Biz Owner Eyes Caesars
Jun. 15, 1999
LAS VEGAS (AP) _ A business that proudly boasts it runs the world's biggest Internet sex site was greeted with widespread skepticism as it announced a $3.6 billion offer to get into the casino gambling business by buying one of industry's most-recognized names.
Ocean Fund International, which owns the Sex.com Web site and describes itself as a British Virgin Island mutual fund, said Tuesday it wants to purchase Caesars casinos as well as some nongambling properties.
``We characterize that as bizarre and we underscore the word bizarre,'' said Jason Ader, a gambling industry analyst for Bear Stearns & Co. ``Our advice to investors is to dismiss this as so much noise. It's not likely to have much credibility.''
Park Place Entertainment Corp. already has reached agreement to buy Caesars casino-hotels from Starwood Hotels and Resorts for $3 billion.
Park Place said its plan to purchase the Caesars properties is ``on track and scheduled to close in the fourth quarter of 1999.'' It said it did not plan to respond to the unsolicited offer from Ocean Fund, which also caught Starwood officials by surprise.
``We have never heard of Ocean Fund International,'' Starwood spokesman Jim Gallagher said. ``We have no knowledge whatsoever of their purported offer. They have talked to no one here. Their press relations guy said the offer was sent to one of our executives, but that executive has never heard of him.''
O. Robert Meredith, a Salt Lake City attorney representing Ocean Fund, said he faxed an offer to both Starwood and Park Place late Monday. He said Ocean Fund is ``legitimate,'' adding ``I know they pay their bills.''
Gallagher said Starwood was continuing to work with Park Place toward completion of a deal announced in April.
In trading Tuesday on the New York Stock Exchange, Starwood was up 43 3/4 cents at $31.87 1/2 a share, while Park Place was down 18 3/4 cents at $9.50.
The proposed purchase was announced in a statement released on PR Newswire, a commercial service for distributing news releases. Renu Aldrich, public relations manager for PR Newswire, told The Associated Press on Tuesday that the company had launched an investigation into the release after an internal check system ``raised red flags.''
She said PR Newswire had concerns about the release until Meredith provided a copy of the offer, which the lawyer said was sent to Russell Sternlicht at Starwood and Arthur Goldberg at Park Place.
Asked why Ocean Fund picked Caesars, Meredith said: ``They felt the bid on the table was substantially less than what it was worth.''
But even the lawyer for Ocean Fund was skeptical.
``My thought is they're going to have an uphill battle'' getting licensed in the various states because they feature pornographic material, Meredith said.
Joe Coccimiglio, a casino analyst for Prudential Securities, said licensing ``would be a great challenge, particularly in all the states.''
Ader agreed it would be hard for Ocean Fund to obtain gambling licenses in Nevada, New Jersey, Mississippi and Indiana because of the nature of its Internet business.
Dennis Neilander, a member of the Nevada Gaming Control Board, said the agency is unfamiliar with Ocean Fund and has had no contact with the company. He said Nevada gambling laws include a morals clause and that issue ``would be a tough one to overcome.''
Meredith said Ocean Fund's offer sought Caesars Palace, Las Vegas; Caesars, Atlantic City, N.J.; and Caesars Tahoe, Stateline, Nev. It also sought to buy a Caesars property in Robinsonville, Miss.; Caesars Pocono Resorts in Pennsylvania; the ``Glory of Rome'' riverboat in Indiana; Caesars Manila in the Philippines; and Caesars Johannesburg in South Africa, which is under construction.
The Caesars properties in Pennsylvania include four resorts and do not have gambling.
The Park Place offer included only the gambling properties.
Starwood has been shopping the Caesars properties for more than a year, wanting to get out of the gambling business. Gallagher said the company was flooded with offers, some serious, during that time but he was perplexed by the Ocean Fund proposal.
Messages left at Ocean Fund by the AP were not returned.
Chris Wloszczyna, a spokesman for the Investment Company Institute, said Ocean Fund was not one of ICI's 7,500 members and he had no records on them. ICI is a trade association of U.S. mutual funds. Dow Jones Newswires reported Ocean Fund is not registered as a mutual fund in the British Virgin Islands.
A news release from Ocean Fund said Sex .com boasts over 9 million members who pay $24.95 per month for access to its Internet site, which receives more than 146 million unique ``hits'' daily. Advertisers on the 1,000-page-deep porn site pay up to $1.5 million monthly to display their banners, the company claimed.