{"id":10251,"date":"2012-12-21T16:17:05","date_gmt":"2012-12-22T00:17:05","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=10251"},"modified":"2022-10-25T04:22:04","modified_gmt":"2022-10-25T12:22:04","slug":"pinnacle-punks-penn-swipes-ameristar","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/pinnacle-punks-penn-swipes-ameristar\/","title":{"rendered":"Pinnacle punks Penn, swipes Ameristar"},"content":{"rendered":"

We’ve learned two important things today. One, that the Mayan calendar<\/strong> is not the most reliable predictor of events. \"\"Two, that Ameristar Casinos<\/strong>‘ on-again\/off-again talk about putting itself up for sale was back in “on” mode<\/a>. Before hardly anybody got wind of what was happening, Ameristar cut a deal to be purchased<\/a> by Pinnacle Entertainment<\/strong>. Unfortunately for the latter, by the time the sale closes, it will probably be too late to get back into the Massachusetts<\/strong> market that Ameristar \"\"vacated and where it still owns land. (That must have depressed the sales price a wee bit.) Ameristar choosing to sell is not the big shocker. That, while trying — and generally succeeding — to right the ship after former skipper Dan Lee<\/strong> ran it onto a reef of excessive expenditures, Pinnacle would flood its hold with $1.9 million in debt inherited from Ameristar … that’s surprising. But it’s only out $869 million in cash, a small fraction of what it would cost to build eight casinos<\/a> in today’s market. While Penn National Gaming<\/strong> was busy blowing its own … horn<\/a>, Pinnacle was cutting an actual deal. Penn CFO William Clifford<\/strong> sounds like an even bigger ass today than he did yesterday.<\/p>\n

\"\"Even at a standard industry multiple<\/strong> of 7.6X cash flow, no doubt some shareholders will shriek that the transaction is underpriced — a ripoff!<\/a> — threaten to sue<\/a> and get a few hundred million extra thrown their way. (Company insiders hold a weak hand<\/a>.) It’s standard procedure. Already the stock has vaulted 20% and at this very moment trades at the $26.50\/share Pinnacle is offering. Let’s say Ameristar CEO Gordon Kanofsky<\/strong> did shop Ameristar to his competitors, who’s got the scratch to buy it … even with the hotly coveted Jackpot<\/strong>, Nevada<\/strong> market up for grabs? Certainly not crippled Caesars Entertainment<\/strong> or tapped-out Boyd Gaming<\/strong> (busy enough absorbing its Peninsula Gaming purchase). Probably not vastly leveraged MGM Resorts International<\/strong>. It’s far too small potatoes for Steve Wynn<\/strong> or Sheldon Adelson<\/strong>, while there would sufficient geographical redundancies to put Penn National Gaming<\/strong> off the scent. Cordish Gaming<\/strong> is a developer, not an acquirer, and pursues a go-slow strategy toward growth. It looks like Ameristar was damned lucky to find a live one out there at all. Deutsche Bank<\/strong>‘s Carlo Santarelli<\/strong>, however, foresees a possible rejection of the deal by shareholders and “would not be surprised to see competing or increased bids.” I agree: No way $26.50\/share gets this deal done, no matter the risk of going up to 8X EBITDA or farther. Let’s just hope any bidding stops well short of the double-digit cash flow multiples that marked the catastrophic Aztar Corp<\/strong>. sale, Station Casinos<\/strong> LBO and Harrrah’s Entertainment<\/strong> LBO.<\/p>\n

\"\"Pinnacle undertakes some redundancies of its own<\/a>. Ameristar St. Charles<\/strong> is the big dog in the St. Louis<\/strong> market, where Pinnacle has fading Lumiere Place<\/strong> (right<\/em>) and rising River City<\/strong>. It also means going into competition with oneself in Lake Charles<\/strong>, where it would have L’Auberge du Lac<\/strong> and $500 million, new Mojito Pointe<\/strong> … and a stranglehold on Louisiana’s most strategic jurisdiction. Getting into the Kansas City<\/strong> area at this time is quite like bolting the barn door after the horse has fled but Ameristar Kansas City <\/strong>(above<\/em>) is one of the market’s most resilient properties, all of which are taking a battering from Penn’s Kansas Speedway<\/strong> racino. Pinnacle, however, gets to plant its flag in<\/a> East Chicago<\/strong> as well as adopt the Council Bluffs, Iowa<\/strong> casino that’s been pounding a nearby Harrah’s<\/strong>-branded one into submission. It also will broaden its reach to encompass Mississippi<\/strong> and Colorado<\/strong>. Ironically, although both companies are headquartered in Las Vegas<\/strong>, this deal gets neither one a whit closer to operating in Sin City, although I can think of three or four Strip properties that could use a change of management. One of them, the Las Vegas Hotel & Casino<\/strong>, is owned by Goldman Sachs<\/strong>, which is co-financing the Ameristar takeover.<\/p>\n

\"\"Goldman’s partner is J.P. Morgan<\/strong>, whose gaming analyst, Joseph Greff<\/strong>, calls for a 50% increase in Pinnacle’s share value (to $24\/share) by year’s end. That’s a tall order for three or four business days. Greff justifies this radical upgrade on “highly attractive math,” including 107% earnings per share accretion … when the deal closes. He dismisses MGM (t00 much debt), Wynn (frying bigger fish in Philadelphia<\/strong> and Boston<\/strong>) and Penn (caught with its pants down) as rival suitors. Greff also forecasts a record 13% ROI for the super-sized Pinnacle as well as no federal taxes in the near term, partly due to certain writeoffs (goodbye, Atlantic City<\/strong>). The biggest caveat involves possible Federal Trade Commission<\/strong> objections to three Pinnacle casinos in St. Louis<\/a>, although that would also give CEO Anthony Sanfilippo<\/strong> a gift-wrapped excuse to unload Lumiere Place in favor of River City (above<\/em>). Some of the big boys, like MGM or Wynn Resorts<\/strong>, might come running for a one-0ff if federal strictures cause Mojito Pointe to be put on the block. That’s as close as they’re going to get to Houston<\/strong> for a good, long while.<\/p>\n

Over at Penn<\/strong>, executives have decided to quit pouting about their big defeat on Election Day in Maryland<\/strong> and make a competitive bid<\/a> for the Prince Georges County<\/strong> casino license. One of the goals of the current REIT silliness is engage \"\"in some transparent ledger-demain whereby REIT Penn pursues Rosecroft Raceway<\/strong> while identical-twin cousin Penn PropCo hangs onto failing Hollywood Casino Perryville<\/strong>. Whether county leaders are fooled by such thin smoke and dull mirrors remains to be seen, although I doubt it. Besides, Penn has spent the last four years making enemies by the bushel in Maryland, thanks to its tiresome and splenetic me-me-me way of doing things. Of course, with a half-billion dollars pledged toward Rosecroft, it also might have difficulty going on its much-ballyhooed shopping spree.<\/p>\n","protected":false},"excerpt":{"rendered":"

We’ve learned two important things today. One, that the Mayan calendar is not the most reliable predictor of events. Two, that Ameristar Casinos‘ on-again\/off-again talk about putting itself up for sale was back in “on” mode. Before hardly anybody got … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[40,23,60,15,70,28,145,14,26,81,7,68,86,45,84,72,112,11,35,39,69,95,30,33,111,25,12,32,31,114,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10251"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=10251"}],"version-history":[{"count":4,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10251\/revisions"}],"predecessor-version":[{"id":31804,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10251\/revisions\/31804"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=10251"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=10251"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=10251"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}