Colony Capital pulls takeover bid

Wednesday, Jan. 24, 2001 | 10:50 a.m.

The $1.3 billion marriage of Lake Tahoe-based Harveys Casino Resorts and California-based Pinnacle Entertainment Inc. officially died Tuesday, when the companies said they have mutually agreed to terminate their merger agreement.

The acquisition of Pinnacle by Harveys, an affiliate of Colony Capital of Los Angeles, was thought to have been in trouble since Harveys pulled a $625 million high-yield bond offering in December because of tough market conditions. Harveys had previously extended the deadline to close the deal from Jan. 15 to Jan. 31, but said it will not re-extend this deadline.

Pinnacle is the owner and operator of the Boomtown and Casino Magic chains, with properties in Mississippi, Louisiana, Indiana and Nevada.

With the buyout off, analysts expect another bidder or bidders for Pinnacle could emerge -- but probably not until the company turns around the performance of Belterra, its southern Indiana casino. Belterra has struggled since its October opening.

"Once Pinnacle turns Belterra around, they might be attractive to somebody," said Dennis Forst, gaming analyst with McDonald & Co. Investments. "They have a lot of things to work on there."

Historically, the most active buyers in the gaming industry have been Las Vegas-based Harrah's Entertainment Inc. and Park Place Entertainment Corp., said CS First Boston gaming analyst Brian Egger -- though he didn't conclude that either one would actually bid on Pinnacle.

"They've both selectively made acquisitions when it makes sense, and they are geographically diversified, therefore they might be receptive to the right kind of acquisition," Egger said. "I can't say specifically if they'd be interested in Pinnacle's assets."

In midday trading today, Pinnacle stock was at $11.88, off 88 cents.