Friday, June 28, 2002 | 11:22 a.m.
Riverboat casino operators Hollywood Casino Corp. and President Casinos Inc. say they are interested in selling their assets to potential buyers, a move that may spark interest from larger competitors interested in gaining a foothold in these markets.
One analyst has identified Las Vegas Strip operators MGM MIRAGE and Park Place Entertainment Corp. as possible bidders for Hollywood Casino Corp. The company announced today it had hired investment banking firm Goldman, Sachs & co. in the fourth quarter to help with a possible sale.
Both Las Vegas Strip operators don't currently have properties in the Chicago area, said Lawrence Klatzkin, a gaming analyst with Jeffries & Co.
Dallas-based Hollywood Casino owns three movie-themed casinos in Illinois, Mississippi and Louisiana.
Separately, St. Louis-based President Casinos is seeking a possible buyer for its two casinos in Biloxi, Miss., and St. Louis. The company filed for Chapter 11 bankruptcy protection last week with the aim of refinancing its high-interest debt.
The companies' prospects are decidedly different, one analyst said.
Hollywood Casino has lucrative properties in Aurora and Shreveport that will prompt interest from buyers -- possibly Park Place and Strip competitor Mandalay Resort Group -- should the company decide to sell, said the analyst, who declined to be identified.
That said, Illinois' latest tax hike, as well as disagreement between management and major shareholders about a potential sale, have clouded the company's future, the analyst said. "Investors are very unsure of the rules and regulations in Illinois. They seem to change without notice, without much logic and without any fairness."
President Casinos has little choice but to sell, and it will be harder for the company to find a buyer, the analyst said.
"Neither (property) is doing well. They're underfinanced, with lackluster locations."
Demand for the casinos "is all a matter of price," Klatzkin said. Klatzkin's 12 month price target of $15 on Hollywood Casino stock, which carries a "buy" rating, already factors in the pending tax hike, he said. And President Casino's properties offer land and turnaround possibilities, he added.
"Over the past three years, there's been a lot of gaming M&A. I don't think it's done yet."
William Schmitt, a gaming analyst for CIBC World Markets, said in an earnings update this week that Hollywood Casino's new barge in Aurora should drive revenue growth for the company.
"The demand in the Chicago market remains very strong," Schmitt said. "Further, if the company can effectively control costs and maintain margins, results should continue to improve meaningfully."
Schmitt, who rates Hollywood Casino stock a "strong buy," has raised his price target from $13 to $15. Earnings per share estimates increased from 24 cents to 26 cents per share in 2002 and from 26 cents to 71 cents in 2003.
Hollywood Casino representatives said today there is no assurance the company will be sold. Still, it has deferred the scheduling of its annual shareholder meeting. The sale process has been delayed by the pending tax increase in Illinois, the company said.
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