Three LV companies look at Missouri casinos

David Strow

Friday, Oct. 13, 2000 | 11:02 a.m.

At least three Las Vegas companies have expressed interest in purchasing riverboat casinos in Kansas City and St. Louis from Station Casinos Inc., knowledgeable observers following the matter say.

Boyd Gaming Corp., Ameristar Casinos Inc. and Coast Resorts Inc. have all expressed interest in buying the riverboat casinos from Station, said an observer speaking on condition of anonymity. Station had earlier announced plans to sell the casinos to its Midwest management team for $475 million, but said earlier this week that it may consider selling to another party after receiving a number of substantially similar bids.

But the three Las Vegas companies will face stiff competition, as Illinois-based Argosy Gaming Co. and Pennsylvania-based Penn National Gaming Inc. appear to also be interested in the properties.

A Station spokesman refused to confirm or deny that any of the companies had expressed interest, citing confidentiality agreements with the interested parties. An Ameristar spokeswoman declined comment, saying the company didn't speak about merger or acquisition possibilities; Boyd and Coast officials could not be reached for comment.

One observer said it was likely Boyd, Ameristar and Argosy had the inside track on buying the properties, since all companies either held licenses at one time in Missouri or had been through the licensing process there. That's important for Station, the source said, as it is looking for a buyer that could be licensed quickly. The licenses for the two casinos expire in December and January, and the commission has already moved to revoke the licenses. Station is appealing that order.

"They (Station) are in a hurry," the analyst said.

A separate source said Coast Chairman Michael Gaughan has been in Missouri the past few weeks exploring a deal.

While not commenting on individual bidders, PaineWebber gaming analyst Robin Farley said the most logical bidders would be mid-size gaming companies.

"A lot of the large-cap operators like Park Place or MGM (MIRAGE) have had opportunities to be in Missouri or have been in Missouri, and it doesn't necessarily make sense for their long-term strategy," Farley said. "For some of the smaller cap operators whose strategy is to have their cash flow be a little more diversified, it could make sense, because these properties are providing a decent return.

"For some of these smaller caps without growth opportunites, this could be a real growth opportunity."

And the Station properties are some of the more attractive ones on the market, said CIBC World Markets gaming analyst Adam Steinberg.

"These are attractive properties in a market that has performed well with regulatory relief," Steinberg said. "They could perform better with the lifting of the $500 (loss limit in Missouri casinos). There are a number of logical bidders for both properties or an individual property."

For Ameristar, a bid at the properties would mean a second shot at the Missouri market. After spending $1.9 million this year, Ameristar was beat out by Isle of Capri for a new gaming license awarded in St. Louis County. Ameristar also operates casinos in Iowa and Vicksburg, Miss. Coast too has expressed interest in expansion beyond Nevada, but hasn't specified which markets it has looked at beyond an ongoing effort to win approval for a casino near Biloxi.

For Argosy, a buyout would tighten its grip on the Missouri market. Argosy operates one riverboat in Alton, Ill., over the Mississippi River from St. Louis. The company also holds a Missouri gaming license for its property in Riverside, Mo., near Kansas City. Argosy also operates in Louisiana, Iowa and Indiana.

Boyd has been on something of an acquisition spree over the past several years, buying three properties in Indiana and Illinois in the past three years. Yet Boyd's ability to buy the two Station properties could be limited because the company is currently devoting capital to building the $1 billion Borgata in Atlantic City in a joint venture with MGM MIRAGE. Boyd's low stock price could also work against it, an industry source said.

Of the five bidders, Penn National has been the most open about its plans to expand. The company recently closed on the acquisition of two Mississippi casinos from Pinnacle Entertainment Inc. for $195 million, and is trying to acquire Carnival Resorts and Casinos. The company's chief executive has stated the company will continue to "opportunistically ... build a portfolio of well-established gaming properties."

Colony Capital of Los Angeles is also often mentioned as a potential bidder for the properties, though sources could not confirm that the company had actually approached Station. Colony owns Harveys, operator of casinos in Colorado, Iowa and Lake Tahoe, and has agreed to buy Pinnacle, operator of casinos in Biloxi, Bossier City, La., New Orleans and Reno. Pinnacle will open Belterra Casino Resort, located 35 miles southwest of Cincinnati in Southern Indiana, by the end of this month.