Riviera rejects merger proposal from Riv Acquisition

NEW YORK, March 28 (Reuters) - Casino operator Riviera Holdings Corp. RIV.A said on Wednesday that its board has rejected a $27 per share cash merger proposal it received on March 26 from Riv Acquisition Holdings Inc.

The proposal values the company at about $329 million, based on 12.17 million shares outstanding, as of December 31, 2006.

The Las Vegas-based company said Riv Acquisition has entered into a lockup and option agreement for 9.2 percent of its outstanding shares held by Triple Five Investco and Dominion Financial without prior approval from Riviera's board.

Riv Acquisition's action have triggered the defensive provisions of its articles of incorporation applicable to substantial stockholders, Riviera Holdings said in a statement.

The company said that if Riv Acquisition were to go ahead and buy its shares from Triple Five, Dominion Financial or any party without the board's prior approval, their voting rights as to those shares would be drastically reduced.

Riviera Holdings Corp. owns and operates the Riviera Hotel and Casino on the Las Vegas Strip and the Riviera Black Hawk Casino in Black Hawk, Colo.

Shares of Riviera at $28 on Wednesday on the American Stock Exchange.