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LAS VEGAS-Representing union pension funds that hold 2.7 million shares of Station Casinos Inc., CtW Investment Group has asked a special committee of the casino operator to reject a $4.7-billion management-led buy-out it says “significantly” undervalues the company.

The committee is considering an $82-per-share office from a group that includes Station chief executive Frank Fertitta and Los Angeles-based real estate investment firm Colony Capital, LLC. CtW could not be reached Thursday for comment. Citing Station’s valuable real estate holdings and tribal and commercial management contract, CtW estimates in its letter that the fair value of the company is closer $97 a share.

CtW Investment Group also called for the resignation of James Nave, chairman of the special committee, suggesting that he may not be sufficiently independent “given his recent role in facilitating a strategic acquisition by the Fertitta family’s investment arm. Station Casinos did not return a phone call seeking comment. At the close of trading Thursday, Station’s shares had risen by $0.69 cents to $82.66 on the NYSE.

Founded in February 2006, CtW Investment Group is affiliated with Change to Win (CtW), a federation of unions representing nearly six million workers in the United States. Members of CtW affiliates participate in public and Taft-Hartley pension funds, which have approximately $1.5 trillion in assets, including $180 billion from CtW affiliates. “The CtWIG pays particular attention to major corporate transactions and contests for control because of the magnitude of shareholder value at stake and the fact that many past deals have destroyed such value,” the company states on its website.

In its letter, CtW pegs the per-share value of Station’s EBITDA-producing assets at $68.92, per share value of its real estate at $20.88 and the per-share value of net present management contracts at $8 per share, for a total valuation of $97.80 per share. The valuation, in line with a recent $100 per share estimate by Nollenberger Capital, represents a multiple of 12.9 times estimated 2008 EBITDA.

In backing up its estimate, CtW says it used Station’s mid-range estimate of its land value rather than its high-end estimate, which would have raised CtW’s valuation above that of Nollenberger. Moreover, CtW says Station’s valuation of its land includes an estimate of between $5 million and $8 million per acre for the 68 acres it owns around Wild Wild West, which is well below recent transactions.

“In our view, the proposed $82 offer by Fertitta Colony Partners would allow the insiders of the company to unfairly capture the value of [the company's investments over the past several years] at the expense of the long-term shareholders,” concludes the CtW letter.

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