The Seminole Tribe of Florida grabbed the world's attention Thursday with its nearly billion-dollar purchase of the Hard Rock brand, demonstrating its economic strength by expanding its gaming success to the hotel and restaurant industry. The Seminoles agreed to buy Hard Rock International Inc. for $965 million from London-based Rank Group PLC in what is thought to be the largest single acquisition by an American Indian tribe.
The deal, expected to close in March, will give the tribe an instant presence in 45 countries and make it the owner of the largest collection of music memorabilia in the world. "This is a legendary day for the tribe and for other tribes around the country," said Seminole Gaming CEO James Allen. The tribe completed the deal about 11 p.
m. Wednesday, the last of more than 70 bidders left standing for Hard Rock International. Allen said the tribe would like 25 to 50 Hard Rock hotels to open nationwide within the next decade.
Tribal leaders discussed adding "Seminole" to the Hard Rock name, but decided to leave the name and logo unchanged. The Seminoles bought the Hard Rock brand name as well as 68 company-owned Hard Rock Cafe Restaurants and retail stores, primarily in the United States. The tribe also acquired licensing or franchise agreements for 56 more restaurants, five hotels and two Hard Rock Live!
concert venues. Rank Group held onto the Hard Rock hotel and casino in London and will rebrand it. The Hard Rock hotel and casino in Las Vegas has no ties with Hard Rock International and is owned by Morgans Hotel Group.
"This lets the Seminoles diversify in the general leisure and entertainment field and gives them a very powerful name if they want to open casinos in other jurisdictions," said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. "I could definitely see them opening one up in Atlantic City." The Seminoles opened the first Indian bingo hall in the United States in 1979, helping spark the American Indian gaming movement.
Tribal casinos now generate an estimated $22 billion in gaming revenue annually. In Florida alone, the Seminoles' seven casinos and the one Miccosukee casino generated an estimated $1.3 billion in revenue last year.
The Seminole Tribe has averaged an annual profit of more than $500 million from its gambling operations since the opening of the Hard Rock hotels and casinos near Hollywood and Tampa, according to court documents. Rank Group put Hard Rock International on the auction block this summer after deciding to focus on gambling in the United Kingdom. Hard Rock generated $493 million in revenue last year and $68.
6 million in profit before interest and taxes. About 30 percent of the profit was from licensing fees paid by the Seminoles, Allen said. Now those dollars can be redirected into the Hard Rock International purchase, he said.
The tribe expects to fund the purchase with a combination of debt issued by a new Hard Rock operating company and funding from the Seminole's gaming division. " The deal says to the non-native economic community like Wall Street, `Hey, you can do business with native tribes and be successful,'" said Seminole Tribe Vice Chairman Max Osceola. The Seminoles held a news conference Thursday morning at the Hard Rock in New York City's Times Square.
After a blessing from a medicine man, Hard Rock International President Hamish Dodds presented Osceola with a guitar once owned by Hank Williams Sr. The Hard Rock Cafe, founded in 1971, popularized the "eatertainment" theme of restaurants and has emerged as the most stable. Rivals such as Planet Hollywood have faced financial problems, including bankruptcy.
Analysts say these types of restaurants tend to be expensive to operate and often lose their novelty with customers after the first visit. Schwartz said what's appealing about the Hard Rock brand is that it's always evolving so it can attract new audiences. The properties appeal to Baby Boomers who want to see Eric Clapton's guitar, but also teens who want to see the jacket of a pop band's lead singer.
The Hard Rock purchase fits with moves by other tribes to diversify outside gambling, said David Palermo, managing editor of Indian Gaming Business magazine. More than 90 percent of the Seminoles' budget comes from gambling revenue. "The magnitude of the deal is impressive and a bit unique, but it will only be precedent-setting for a short time," said Palermo, who observed that other tribes have deals in the works for agricultural and energy development.
The National Indian Gaming Association, a non-profit organization representing 184 Indian nations, also hailed Thursday's deal as a sign of things to come. "What it says is that with a little opportunity, American Indians can share in the American dream," said Ernest Stevens, the organization's chairman. "There is an extreme interest in expanding the hotel segment," he said.
The Hard Rock International will continue to have headquarters in Orlando. The company directly employs more than 7,000 people. The tribe said it plans to keep the current management team in place.
The tribe's expanding finances and gambling influence has translated into greater wealth for its nearly 3,300 members. Each Seminole, children and adults alike, receives a monthly dividend check of $7,000, or $84,000 annually, as his or her share of money made from the casinos. In 2003, one year before the Seminole Hard Rock opened in Hollywood, each member made $36,000 per year, and that jumped to about $50,000 in late 2004, according to tribe members.
"The sun will always shine on Seminoles' Hard Rock Cafes," he said. Staff writers John Holland, Tom Stieghorst and Ian Katz contributed to this report.
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