Late last night the news broke that Churchill Downs has purchased 50.1% of Rivers Casino in Des Plaines from a consortium headed by Rush Street Gaming. The company 
is paying $326 million for a slight majority in an asset valued at $1.45 billion, with the option to pay another $174 million over time. What went unsaid was that Churchill Downs has tapped a huge cash spigot, as Rivers Casino is far and away the dominant casino in Illinois, month in and month out. No competitor has ever come close. It also means that Churchill Downs will probably be shopping some 336 acres at Arlington Racetrack, which it had been keeping in its pocket as a potential casino site. JP Morgan analyst Joseph Greff theorizes that the value of such a transaction could be worth as much as $18/share.
Otherwise it was pretty much business as usual for CHDN: A soft 3Q18 at the tracks “partially redeemed” (Greff) by the performance of the casino portfolio. Given the immensity of the Rivers Casino acquisition, we are going to have to start thinking of Churchill Downs as a casino operator first and a racetrack force second.
* Cameron McKnight of Credit Suisse is a projecting 33% increase in Las Vegas convention attendance through the first half of next year. “To put 96,000 additional attendees in perspective – that’s enough room nights to fill the [sic] Bellagio for 70.4 
days.” Bellagio owner MGM Resorts International has been more circumspect, forecasting 80,000 more conventioneers. “The consensus view is now that MGM has guided conservatively or is ‘sandbagging,'” McKnight wrote, “the outlook. We think a conservative approach to the 4Q is appropriate, as 4Q is a very tricky quarter as the bulk of revenues are booked in October and New Years’ Eve, with Vegas very quiet in December” There’s some upside for Sheldon Adelson too (beyond higher convention attendance, which will warm the cockles of his heart): Tao Asian Bistro in The Venetian is the top-grossing non-chain restaurant in the United States. Well chosen, sir.
* Penn National Gaming came in for a soft landing in 3Q18, coming up short of the 
runway in both cash flow ($114.5 million) and revenue ($790 million where Wall Street had expected $807 million). Greff thinks the Pinnacle Entertainment acquisition, which closed mid-October, will put some wind under Penn’s wings. On the plus side, 17 of 23 Penn properties improved their operating margins during the quarter. Looking ahead, the Margaritaville Bossier City purchase is on track for an end-of-year close. The company also announced that it had applied for a satellite-casino license in Berks County, Pennsylvania. The Penn empire continues to spread.
* Gaming growth in Macao is slowing. McKnight reports that an increase of 2.5% fell short of Wall Street expectations of 3.5%. We are reminded of the wise words of Galaxy 
Entertainment Chairman Lui-Che Woo to give this recovery two full years to shake out. According to McKnight, October came in roaring like a lion and exited as discreetly as a mouse. Mass-market revenues were up 10% but all-important VIP ones were 8% down. Worse still, a 2% decline is expected this month. Although Sands China‘s high exposure might seem like a liability, McKnight says that it is its strength and that the company is his pick in the Macanese sector.
