Power shift at Ameristar

No longer will the Craig H. Neilsen Foundation be calling the shots at Ameristar Casinos. The financial needs of the nonprofit have led Ameristar Chairman Ray Neilsen to liquidate 83% of the foundation’s stake in ASCA for an above-market $17.50. The planned sellback would see Ameristar repurchase 44% of its shares for a $458 million tab. Wall Street didn’t jump for joy at the news, as Ameristar went into a steep dive at the start of trading and hasn’t pulled out yet. (You might say the announcement is going over about as well as James Franco‘s Academy Awards hosting gig did.)

A concurrent borrowing of $2.1 billion is expected to retire $1.5 billion in existing debt, cover the stock repurchase — and leave $200 million in working capital. The buyback implies a $1 billion-plus price tag for all outstanding Ameristar stock …. a bargain compared to the $2.27 billion the company would fetch were it priced at seven times cash flow. And with EBITDA 7% off 2009’s performance, Ameristar might be an attractive acquisition, were it not for existing or anticipated adversity in four of the company’s six primary markets.

Ameristar’s assets are still a mostly complementary fit to those of Boyd Gaming but the latter is cautious and probably won’t pursue Ameristar with so much near-term uncertainty beclouding the future. That would include the impact Penn National Gaming‘s Kansas Speedway casino will have on Ameristar’s performance in Kansas City, not to mention traffic disruptions both in Indiana and now (for a two-year period) in St. Charles, Missouri, normally an ASCA cash cow. I’m sure gluttonous Caesars Entertainment would devour Ameristar if it could, but good luck selling that idea to Wall Street.

CEO as Svengali. It says much of the persuasive powers of CEO Gary Loveman that he was able to serve an empty sandwich to Wall Streeet in the company’s latest earnings announcement and have it described as though it were filet mignon. The company’s bottom line dipped back into the red, as revenue grew a meager 1%. Caesars’ (painfully) obvious frugality arguably narrowed that loss, if a one-time gain is backed out of 2009’s numbers. Strip revenue nudged up $30 million in the last quarter of 2010, growth achieved by dint of adding Planet Hollywood, it would appear. Lack of greater detail prevents one from ascertaining whether Caesars is achieving even its small annual revenue increase on a same-story basis but one suspects that, on average, it isn’t.

The listlessness Caesars execs perceive in the Vegas economy extends throughout much of their empire. Even with a plethora of regional casinos, the company is treading water. Local journalists report that the fourth-quarter announcement is intended, in part, to chum the waters for another IPO attempt. Pay no attention, Wall Street, to the $18 billion-plus in long-term debt behind the curtain.

But I’m confident the Ferris wheel will turn everything around. By the way, there’s no longer a Las Vegas Monorail behind Imperial Palace in that rendering. Does Caesars know something we don’t?