A Good Hand For United Gaming

In a city filled with glitz, Las Vegas-based United Gaming has little of it. The company's revenues come mainly from placing its slot machines and other coin-operated gambling devices in bars, restaurants, and retail outlets. But what United Gaming, now selling at 8 3/4, has that the giant gaming operators don't is superinvestor Richard E. Rainwater.

Rainwater's Kirkland-Fort Worth Investment Partners and Gaming Systems Advisors invested $5 million in United Gaming. Through restricted stock and warrants, the Rainwater group holds 20.4% on a fully diluted basis. The Rainwater deal, plus $85 million from a convertible debt issue, gives United Gaming the means to expand. Besides Nevada, it's looking to Louisiana, where it has 800 video poker machines. It also plans to invest in a dockside casino in Vicksburg, Miss., and is part of a group seeking a riverboat casino in Evansville, Ind.

In addition, Rainwater's group named four of the seven UG directors. The investor says he's not taking an active role in the company--he just wants to invest in a booming industry. "People can't get enough of the thrill of betting," says Rainwater.

Despite revenues of $113 million in the fiscal year ended June 30, UG lost money and hasn't made a profit since 1990. One New York pro has been buying shares mainly because of Rainwater. With United Gaming, Rainwater says he hopes to duplicate what he did in health care six years ago: His original $125,000 investment in a hospital company is now worth over $100 million in Columbia Healthcare stock.

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