Boyd Gaming expects the Cannery Casino Resorts takeover to close early in the fourth quarter of this year, according to company spokesman David Strow. "Historically, we keep the brands of properties we acquire," he says, except in extreme cases: Sam's Town Shreveport was a Harrah's casino when Boyd bought it in 2004, for example.
As for making changes to Eastside Cannery itself, "We need to take ownership of the property, evaluate the operation before making any decision." Boyd has told Wall Street analysts that it expects to spend as much as $5 million bringing the Canneries up to date. One loser in the transaction was Australian billionaire James Packer, who saw a $420 million investment in Cannery Casino Resorts wiped off the books.
Eastside Cannery may be lagniappe in the $115 million acquisition. The real prize seems to have been the original Cannery in North Las Vegas. Boyd is putting down a big bet on the emergence of the city as a major hub of manufacturing in Southern Nevada, with Faraday Futures and Hyperloop Technologies building in the area. To that extent, it simultaneously plunked down $380 million for Aliante Casino on the north 215 Beltway. "It will further strengthen and diversify our robust Las Vegas portfolio, which is the fastest growing segment of our business," said Boyd CEO Keith Smith.
Built in 2008 for $662 million by Station Casinos, the casino had already changed hands once, when private equity funds Apollo Management, Texas Pacific Group, and Standard General, plus sundry banks, obtained Aliante in a 2011 debt-for-equity swap. (Station Casinos chose to repurchase Green Valley Ranch instead.) Although Aliante is currently only modestly profitable – $6 million last year – Boyd plunked down a payment worth 13 times cash flow … almost double the industry-standard 7X cash flow that the company paid for the Canneries.
However, Boyd has wanted a north-Beltway casino for some time and a venture in that area, in conjunction with developer Gary Goett, was deep-sixed by the Great Recession. Also, it is cheaper to buy than to build, so it can be argued that Boyd got a bargain on Aliante, prevailing in what is rumored to have been a fierce bidding war.
As for the Cannery, it has 80,000-square-foot casino, a 200-room hotel, five restaurants and five bars, a 30,000-square-foot entertainment venue, and a 14-screen cineplex. Eastside Cannery has a bit less casino and more accommodations: a 64,000-square-foot casino, more than 300 hotel rooms, five restaurants and four bars, 20,000 square feet of meeting and ballroom space, and a 250-seat entertainment lounge (plus coin-in slots).
Boyd's share of the Las Vegas locals market is expected to escalate from 26 percent to 33 percent when the deals are done. That's higher volume, obviously, but also comes with some increased risk considering that Boyd just sold its half of Atlantic City cash cow Borgata to MGM Resorts International. With a higher exposure to the vagaries of the Las Vegas market and no Atlantic City revenue stream to ameliorate the risk, we'll be watching the fortunes of Boyd closely in the months to come.
