Slot stocks rise on Penn. deal

Friday, June 25, 2004 | 8:57 a.m.

BLOOMBERG NEWS

Shares of International Game Technology, WMS Industries Inc., Alliance Gaming Corp. and Penn National Gaming Inc. rose Thursday after Pennsylvania legislators and Gov. Ed Rendell reached a tentative agreement on allowing slot-machine gambling in the state.

The state will permit as many as 61,000 slots in the next two years at eight horse-racing tracks, four off-track sites and two resorts, said Mike Manzo, chief of staff for House Democratic leader H. William DeWeese. A vote in the state's House and Senate may come as early as Monday, he said.

The addition of slots would boost profit for International Game, the world's largest slot-machine maker, and smaller rivals WMS and Alliance Gaming, Susquehanna Financial Group analyst Eric Hausler wrote in a report. Pennsylvania would receive at least $1 billion in fees and taxes to fund schools and cut property taxes, Manzo said.

Shares of International Game rose $1.44 to $37.70 at 4 p.m. in New York Stock Exchange composite trading, WMS rose $1.21 to $27.87 and Alliance Gaming rose 50 cents to $16.37 Shares of Wyomissing, Pennsylvania-based Penn National, which owns racetracks including Penn National Race Course in the state, rose $1.24 to $32.03.

International Game is based in Reno; WMS in Waukegan, Ill.; and Alliance in Las Vegas. International Game controls about 70 percent of the worldwide market share for slots.

Rendell, a Democrat, has urged the legislature to pass a bill before lawmakers start their summer break at the end of the month. The state House and Senate failed to agree on a bill last year.

Adding slot machines in Pennsylvania shouldn't hurt Atlantic City, a big casino market along with Las Vegas and California, said Michael Pollock, publisher of Gaming Industry Observer, a casino newsletter based in the city. About 22 percent of Atlantic City gamblers now come from Pennsylvania, he said.

Slots in Pennsylvania may introduce more residents there to gambling, which may eventually encourage them to visit Atlantic City, Pollock said. The addition of amenities such as restaurants to existing properties is allowing Atlantic City to offer more than gambling, he said.

"Atlantic City is evolving into a regional destination with a broad array of offerings," Pollock said. "It's going to grow the pie and whet the appetites for other entertainment."

International Game and other slot makers also may sell more machines in California. On Monday, California Gov. Arnold Schwarzenegger signed new casino agreements with five Indian tribes that would eliminate a 2,000 slot-machine limit in exchange for payments.