‘Twas the day after Christmas and all through the house, shareholders were beginning to cool on the value of Ameristar Casinos stock. It closed ever so slightly down from Pinnacle Entertainment‘s $26.50/share offer price. Perhaps I was wrong and $869 million is enough to get this deal done, after all, though I still expect rumbles of discontent from stockholders as approval of the sale draws near. At least one Wall Street analyst, however, looks at the sale price and gets vertigo. And no wonder: Further crunching of the numbers shows the cash-flow multiple deal to be 8.3X, not the previously advertised 7.4X, meaning it’s above market average. Only Isle of Capri Casinos currently has a better debt-to-cash flow ratio than Pinnacle (Las Vegas Sands has the worst, at 13.4X), but while only Penn National Gaming surpasses Ameristar in profit margins, that latter is looking at no foreseeable revenue growth … well, so small it’s not worth mentioning.
Even if Penn wanted to get into the hunt for Ameristar, the question is not only academic because of Penn’s current REIT machinations (among other reasons) but also due to the obvious lack of interest by Ameristar brass in staying on to run their former casinos as tenants of Penn. Their actions have made it plain they want out, period. However, Pinnacle is assuming so much Ameristar debt that it may have to turn right around and sell nearly all its gaming assets to Penn to amortize the acquisition. Kinda makes you wonder, “Why bother?”
Heck, Pinnacle CEO Anthony Sanfilippo sounds like he’s whistling past the graveyard when he talks about closing the deal without selling a single casino (even though he’ll have two in Lake Charles and three in St. Louis). As Credit Suisse analyst Joel Simkins was paraphrased as saying, “Pinnacle might have to rethink portions of that strategy before the deal closes sometime next year.” A Pinnacle-seeking Penn would face the same consideration, since it, Pinnacle and Ameristar have five St. Louis-area casinos between them and would have three in the exsanguinated Kansas City market. So everybody’s going to have to give up something to get something, although these concentrations of ownership would mean it’s a buyer’s market for small operators looking to scoop up an asset like Lumiere Place or Alton Belle on the cheap. Let the divestitures begin!
Yes, Virginia, you can buy your way out of jail … at least if you’re former Pittsburgh Steelers player Joey Porter and make good $70,000 in defaulted markers to the Hard Rock Hotel & Casino. (Porter was being detained in Bakersfield, not Las Vegas, in case you were wondering.) The operative question here is not one of “checkbook justice” but why HRH operators Warner Gaming extended no fewer than eight markers to Porter over a two-month period. What’s the magic number of markers you have to request before the realization dawns in Warner’s head that you might not be good for the money?
Having successfully hornswoggled the Las Vegas Sun, the Sunshine Boys from Colliers International took their snake oil over to the Las Vegas Review-Journal, trying to sell the story that a bunch of smallish development constitute a HUGE recovery on the Strip. It’s old news, mostly. Half of the $1.5 billion worth of investment is divvied between four Caesars Entertainment projects (including The Quad, the Linq and the Ferris wheel). Nearly another half-billion is represented by the very iffy-looking Sahara revamp by Sam Nazarian. It’s supposed start work in January, per Colliers, but the site is as moribund as ever. And if a successful relaunch of the Sahara as SLS Las Vegas is what’s required to get Echelon, Fontainebleau and the orphaned New Frontier site going again, don’t hold your breath.
About the only really novel news Colliers is shopping around is that — like me — they’ve heard rumors the Las Vegas Hotel & Casino will be sold, for roughly $250 million. (OK, I hadn’t heard the price bit, but it sounds mighty optimistic, given the hotel’s financial and physical condition.) A near-term unloading of that albatross around Goldman Sachs‘ neck would explain much of the recent inactivity at the LVH, such as its non-absorption into American Casino & Entertainment Properties, the jobbing-in of grind-joint operators Navegante Group to run the place and putting all employees on notice that they could be fired en masse at a moment’s notice. It makes you shudder to think what other cheeseparing measures Goldman might be making over at the ex-Hilton, a sorry-looking semblance of its former self.
Colliers is also blowing smoke about “medical tourism.” Gee, is LV health care that good? Colliers may not sell a lot of real estate, but they sure got ins with the local “press.”