The Seminole Tribe of Florida said Thursday it was buying the famed Hard Rock business, including its casinos, restaurants, hotels and huge collection of rock ’n’ roll memorabilia, in a groundbreaking $965 million deal with a British company.
The deal with London-based Rank Group PLC is believed to be an American Indian tribe’s first purchase of a major international corporation of its size, the Seminoles said. It includes 124 Hard Rock Cafes, four Hard Rock Hotels, two Hard Rock Casino Hotels, two Hard Rock Live! concert venues and stakes in three unbranded hotels.
The Seminoles were the first U.S. tribe to get into the gambling business in 1979. More recently, they had partnered with Hard Rock in successful hotel, gambling and entertainment complexes in Tampa and Hollywood in tourist-friendly Florida. They now have the ability to expand their gaming interests nationally by partnering with a well-known brand, experts said.
The tribe also will acquire what is said to be the world’s largest collection of rock memorabilia, some 70,000 pieces including Jimi Hendrix’s Flying V guitar, one of Madonna’s bustiers, a pair of Elton John’s high-heeled shoes and guitars formerly owned by Bob Dylan, Eric Clapton and Chuck Berry.
The deal does not include Hard Rock’s Las Vegas casino, however, which is owned by Morgans Hotel Group, or Morgans’ rights to Hard Rock intellectual property in Australia, Brazil, Israel, Venezuela and many areas of the United States west of the Mississippi River, a Morgans official said.
Rank said the sale freed it to concentrate on gambling. It retained the Hard Rock Casino in London and plans to change it to the Rank Gaming brand.
“Hard Rock is a very strong brand,” said Jeffrey Harwood, an analyst with Oriel Securities in London. “It needs further capital to be injected in the business into expanding it, which is one of the reasons Rank decided to sell.”
At a Thursday news conference in New York that began with a blessing from a tribal representative, tribe Vice Chairman Max Osceola compared the sale to when American Indians sold Manhattan to the Dutch for “trinkets.”
“We’re going to buy Manhattan back one hamburger at a time,” Osceola said.
Hard Rock International President and Chief Executive Hamish Dodds gave Osceola a guitar that belonged to Hank Williams Sr.
“This is a proud moment for the Seminole Tribe of Florida and for all Indian tribes,” said Mitchell Cypress, chairman of the elected Tribal Council. “It is also an opportunity for the Seminole Tribe to diversify its business operations and help a very successful company to achieve even greater growth.”
The Seminoles tribe has about 3,300 members living on and off Florida reservations and all of them receive payments due to the success of casinos. They are pacesetters in the growing world of Indian gaming.
After selling tax-free tobacco products, the tribe opened a bingo hall in 1979 in Hollywood. It survived legal challenges from the state over the right to be in the gambling business, which led to other casinos on reservations in Florida and opened the door for tribal gaming across the nation.
U.S. tribes now have more than $22 billion in annual revenues from gambling, according to government figures.
“The Seminoles were in the forefront of those who did it right and did it successfully, so I’m sure they can take what they learned there and put it into other areas of entertainment and hospitality,” said Phil Hogan, chairman of the National Indian Gaming Commission, a federal agency that oversees gambling on tribal lands.
In addition to its two Seminole Hard Rock hotels & casinos, the Seminole Tribe owns and operates five other casinos in Florida. More than 90 percent of the tribe’s budget now comes from gaming revenue.
The deal also follows a national trend of tribal casinos teaming with large corporations or going to other states to expand their reach. For example, the Mashantucket Pequot tribe, which operates Foxwoods Resort Casino in Connecticut, earlier this year said it was leasing the MGM Grand name from MGM Mirage. A $700 million hotel and casino expansion will be called the MGM Grand but will be operated by Foxwoods employees.
David Schwartz, director of the Center for Gaming Research at University of Nevada Las Vegas, said the Seminoles likely made the deal with gambling expansion at the top of their priorities.
“I don’t think that they bought this because they only want to go into the restaurant industry,” Schwartz said. “I don’t think they want to only serve boneless buffalo wings.”
Peter Morton, co-founder of the Hard Rock brand, sold his interests to Rank Group in 1996 for $410 million. He had retained ownership of the Hard Rock Hotel and Casino in Las Vegas, but sold that to Morgans Hotel Group Co. for $770 million in cash in May.
Rank Chief Executive Ian Burke said the company would return 350 million pounds ($690 million) of the sale proceeds to shareholders in a special dividend of 65 pence ($1.28) per share.
“We have maximized the value of Hard Rock through this disposal following a thorough strategic review and competitive auction,” Burke said.
Last year, Hard Rock posted revenue of 250.1 million pounds ($493 million) and profit before interest and taxes of 34.8 million pounds ($68.6 million), Rank said.
The sale, which is subject to shareholder approval, is scheduled to be completed in March. The tribe said it expects to fund the purchase price from a combination of debt issued by a new Hard Rock operating company and equity funding from the tribe’s gaming division capital structure.