Vegas-based casino operator selling stock

Thursday, Dec. 13, 2001 | 10:54 a.m.

Ameristar Casinos Inc. announced Wednesday it has priced a public stock offering that should net the company $76.8 million.

The Las Vegas-based riverboat casino operator will sell 4 million shares of stock at $20.50 per share; the $76.8 million reflects proceeds after underwriting discounts and related expenses.

Chairman and Chief Executive Craig Neilsen will also sell 2 million shares in the offering, though the company will not receive any proceeds from his sale.

Neilsen, the company's controlling shareholder, will hold a 63 percent stake in Ameristar after the sale, the company said.

Ameristar said it will use proceeds to pay down debt as required by its credit agreements.

Separately, Merrill Lynch gaming analyst David Anders initiated coverage of Ameristar at "strong buy," setting a 12-month price target of $27.

"Ameristar is one of the leading companies in the riverboat markets, which continue to post very robust results, despite the slowdown in the economy and the events of 9/11," Anders wrote. "Ameristar remains one of the few gaming companies with visible capital growth projects, which will be pivotal in driving cash flow in 2002 and 2003."

Ameristar's return on investment "exceed nearly every other casino operator under our coverage," Anders wrote.

Merrill Lynch is one of the underwriters of Ameristar's stock offering.

The move also prompted CIBC World Markets to increase its 12-month price target from $21 to $26-$27, though it lowered its 2002 earnings estimate from $1.75 to $1.67 per share to account for the additional shares.

"We had applied a 15 percent 'liquidity discount' to our fair value estimate on (Ameristar) to reflect the limited float (shares available for public trading)," wrote CIBC gaming analyst William Schmitt. "Given the addition of 6 million shares to the public float, we no longer believe this discount is warranted."

Ameristar stock traded today at $22.40, down 6 cents from Wednesday. It rose $1.01 Wednesday.