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Tribe to buy Hard Rock

By STEVE HUETTEL
Published December 8, 2006

The Seminole Tribe of Florida liked the iconic Hard Rock brand so much, it decided to buy the company.

The tribe said Thursday it would pay a British company $965-million in a deal that encompasses restaurants, hotels and licensing rights to casinos, including its own Seminole Hard Rock Hotel & Casino complexes in Tampa and Hollywood.

There is also a vast collection of rock memorabilia complete with Jim Morrison's bomber jacket, Jimi Hendrix's childhood rocking horse and John Lennon's handwritten lyrics to Help.

The acquisition from Hard Rock's parent, Rank Group PLC of London, is thought to be the first purchase of a major international company by an American Indian tribe, the Seminoles said.

The deal underscores the economic power of tribes, fueled by a U.S. Indian gaming business that last year generated $22-billion in revenues.

The Seminoles started it all in 1979 with a tax-free tobacco shop and gambling hall on tribal land in Hollywood.

Now, its two Hard Rock casinos and five other casinos churn out annual profits of at least $800-million, said Joseph Weinert of Spectrum Gaming, a consulting firm outside Atlantic City.

"This, more than any other event, is going to open the nation's eyes to the power and success Indian gaming can have," Weinert said.

The deal, expected to close in March, includes 68 company-owned Hard Rock Cafes. The Seminoles also would get license and franchise agreements for 56 other restaurants and five hotels.

"Hard Rock is by far one of the most recognizable brands in 45 countries," said James Allen, chief executive of Seminole Gaming.

The acquisition will greatly diversify the tribe's business. Although its holdings include citrus groves and cattle ranching, the tribe relies on gambling for more than 90 percent of its revenues, Allen said.

A news conference Thursday at a Hard Rock Cafe in New York's Times Square started with a blessing from a medicine man. Max Osceola, the tribe's vice president, drew a parallel to when Indians sold Manhattan Island to the Dutch for some beads.

"We're going to buy Manhattan back one hamburger at a time," he said. He was presented a guitar that belonged to Hank Williams Sr. by Hard Rock chief executive Hamish Dodds.

About 3,300 tribe members live on and off reservations in the state. Before the gaming business began, the tribe was dirt poor, then-Chairman James E. Billie testified before the Senate Indian Affairs Committee in 1999.

"Many of our members lived in open chickees with no electricity or running water," he said. "Our tribal government offices were housed in a mobile home."

Gaming changed all that. Every member has equal share of the business corporation and receives an equal share of profits. In 2004, each Seminole man, woman and child received a $42,000 annual dividend.

The state challenged the first gambling hall, but the tribe sued and won a fight in federal court. That kicked off an expansion of Indian casinos in Florida and across the United States.

But Seminole profits soared with the opening of Hard Rock branded casinos and hotels in 2004 off Interstate 4 east of Tampa and in Hollywood in South Florida.

Unlike the aging halls, they are glitzy and pulsate with rock music. The Hard Rocks regularly sponsor events headlined by sports stars and celebrities that attract younger audiences.

"They enabled the tribe to become mainstream, to become cool," Weinert said. "It's not some Indian casino at the end of a dusty road."

The new casinos also sparked controversy. The Seminoles sued Power Plant Entertainment, which built the Hard Rock complexes in return for 30 percent of the casinos' net profits.

The tribe says Power Plant doesn't provide services and, therefore, has an ownership stake in the casinos, illegal for non-Indians. Power Plant sued back, saying the tribe is trying to get out of a deal in which the company obtained $400-million in financing and put $150-million of its money at risk.

In court papers, Power Plant called the two properties "the two most profitable hotel/casinos in the United States" with annual profits of $500-million combined.

Other tribes are expanding casino and other businesses, often with big-name partners. The Mashantucket Pequot tribe, which operates Foxwoods Resort Casino in Connecticut, is leasing the MGM Grand name from MGM Mirage for a $700-million hotel and casino expansion.

The Mohegan tribe used profits from its Mohegan Sun Casino to buy a women's WNBA basket team in its home state of Connecticut.

The Seminole tribe was among 72 companies that expressed an interest when Rank Group decided in July to put Hard Rock up for sale, Allen said, and beat out three other bidders.

Rank Group wants to focus on its gaming business and lacked the capital to expand Hard Rock. Last year, the 35-year-old chain posted a $68.6-million profit before interest and taxes on revenues of $493-million.

The tribe expects to fund the purchase from a combination of debt issued by a new Hard Rock operating company and equity funding from the Seminoles' gaming division capital structure.

Allen said the tribe expects to expand Hard Rock, particularly the hotel business. He declined to give details before the deal closes.

Times researcher John Martin contributed to this report, which used information from the Associated Press. Steve Huettel can be reached at huettel@sptimes.com or 813 226-3384.

[Last modified December 8, 2006, 05:24:13]