Unlike most "mergers" in the casino industry, which are actually takeovers, this was a genuine attempt to mesh the corporate cultures of Coast Resorts and Boyd Gaming.
In 2004, Michael Gaughan was building his biggest, costliest casino ever – South Coast – and Boyd’s offer of $1.3 billion, 16 million shares of stock, and a semi-autonomous role within Boyd must have looked tempting. He’d built up a loyal customer following at his Coast-branded properties, including The Orleans, and had led the way in making bowling alleys ("I was the bowling baron of Las Vegas," he said in 2008) and movie theaters all-but-required amenities for new casinos. As part of Boyd, Gaughan would sit on the board of directors and preside over the various Coasts, which would operate as a separate division within Boyd.
Things ran smoothly, to all outward appearances, for about a year and a half. However, the $583 million South Coast debuted poorly, partly because promised freeway access ran behind schedule. Boyd experienced ‘buyer’s remorse’ with South Point’s first seven months of performance, during which it generated an 11% return on investment. Gaughan also didn’t care to be part of a publicly traded company, its every move second-guessed by Wall Street.
South Coast was experiencing problems beyond a mere lack of traffic. It attempted to crack the nightclub scene with Fever: "a disaster. I got the people I didn’t want to get, and the people I didn’t want started to scare away some of my regular customers," Gaughan later explained to Casino Journal.
In mid-June 2006, Michael Gaughan met with Boyd Gaming CEO Bill Boyd "and said he did not enjoy the corporate life he has led since the merger and wanted to return to running his own business," according to the Las Vegas Review-Journal. "I’ll straighten this place out," he said of South Point. "I’ve kind of been too far removed from it. I’ve gotten lazy. It’s time to go back to work," The Associated Press records him as saying. He later blamed its struggles on poor marketing and a lack of focus by him, distracted by Suncoast’s new competition from Station Casinos’ Red Rock Resort. He also expressed a fondness for small-scale corporate operations, with fewer layers of management between himself and his employees.
As Gaughan parted ways with Boyd, South Coast became South Point and he got it, free and clear, in a stock-for-equity swap valued at $576 million. It has gone on to become of the most popular (and busiest) locals casinos in the valley, as well as a strong draw for value-oriented tourists. Gaughan characterized the transition as more difficult than opening a new casino: "You have to empty out all the slots, change out all the chips and take down all the stuff while keeping it open," he told the R-J.
But South Point has continued to grow and grow, vindicating Gaughan’s vision. At the time of the resale, Majestic Research analyst Matthew Jacob warned that Boyd might be unloading South Point prematurely … and he seems to have been proven right, too.
