Flamboyant real estate developer Donald Trump, who controls Resorts International Inc., withdrew his offer to buy all of the casino operator's remaining common stock Tuesday, jeopardizing completion of a massive hotel-casino in Atlantic City.
The Trump announcement came soon after Resorts said a special committee appointed to review Trump's $15-a-share bid had found it to be "grossly inadequate."
Trump said Tuesday that he will stop financing construction of the Taj Mahal, which would be Atlantic City's biggest gambling facility with a 1,250-room hotel and a 120,000-square-foot casino.
Trump last month offered to buy the Class A common shares he doesn't already own. Before the offer, Trump owned 78% of the company's 5.7 million outstanding Class A shares, or about 4.4 million.
Trump said in December that he would pay to finish the Taj Mahal only if he owned 100% of Resorts International and that he was making the offer because Resorts was unable to obtain financing.
Alan Greenberg, chairman and chief executive of Bear, Stearns & Co., which is Resorts' investment banker, said the company could not raise the funds to complete the Taj Mahal without Trump's involvement.
A spokesman for Resorts International, Vice President Matthew Kearney, told Reuters: "The tower is built, but it is not closed in."
Asked what other financing arrangements are being considered, Kearney said: "I do not know. I'm sure the board will be considering that in the very near future."
He said there have been no other merger proposals presented to the company.
Resorts Class A traded Tuesday at around $12.625.
Trump is chairman of the Resorts board, owning 709,985 Class B shares, which gave him control of about 72% of the vote.
There is a vast difference in the voting power of the two classes of Resorts International shares. Class B shares carry one vote per share, whereas Class A carry just 100th of a vote.
Owns Other Casinos
Resorts International was the first company to bring casino gambling to Atlantic City, but fell into financial difficulty with its Taj Mahal project. Cost of the project had risen to about $930 million as of November, 1987, from its original estimated price of about $750 million. About $550 million more was needed for completion as of June, 1987, a spokeswoman for Trump told Reuters.
Trump already owns Trump Plaza and Trump's Castle casinos in Atlantic City.
Trump, used to running his own companies without interference, has had to contend with the wishes of minority stock holders since his involvement in Resorts International began in July, 1987.
Critics have accused him of using his voting power to divert the company's resources for his own benefit. He also was accused of showing little regard for Class A shareholders.