Jeff Simpson takes a look at the top casino takeover targets

Sunday, Dec. 31, 2006 | 7:02 a.m.

The growth and evolution of the casino business provide a steady flow of business news, and I expect more of the same in 2007.

Casino company consolidation has been a big trend in recent years, and there will likely be more mergers and acquisitions next year.

Aside from already-announced deals involving private capital firms intending to buy Harrah's Entertainment, Station Casinos and Aztar Corp., there are a couple of other Las Vegas firms that are often mentioned as takeover targets.

Although stock market analysts seem to favor Boyd Gaming Corp. as the most probable object of a takeover attempt, I think Las Vegas-based Pinnacle Entertainment is a more likely target.

Boyd Chairman Bill Boyd likes to point out that he doesn't like to sell, only to buy. Even Harrah's, in its persistent (and eventually successful) effort to obtain the Barbary Coast from Boyd, had to trade land north of the Stardust rather than make a simple cash purchase.

I don't see Boyd selling his company, at least not before his Echelon Place redevelopment of the Stardust site opens in mid-2010.

If I had to bet on a company that is ripe for the picking, I would put my money on Pinnacle. The company has an excellent casino in Lake Charles, La., is building what will likely be two of the best in and around St. Louis, and has a prize parcel in Atlantic City, the site of the recently closed Sands. Pinnacle is very well run and CEO Dan Lee is disciplined and imaginative.

After the bidding for Tropicana parent Aztar grew too expensive, Lee withdrew (and the company collected a tasty consolation prize, $45 million in breakup fees).

I expect Harrah's Entertainment's pending $27.8 billion purchase by private equity firms Texas Pacific Group and Apollo Management LP to slow down implosion plans for Imperial Palace and the older of the two hotel towers at Bally's.

Harrah's management says its redevelopment plans for the center Strip area it controls will continue as planned, but I expect the company to develop some of its substantial real estate holdings east of the Strip before investing the billions necessary to implode and replace hotels.

So condominium, retail and possibly time-share developments will come first, with Imperial Palace remaining open for at least a couple of more years - and producing a mind-boggling $100 million in annual cash flow, I've been told, money that will help to reduce the Harrah's buyers' substantial debt.

One potentially big story to keep an eye on in 2007 will be a possible decision by New Jersey gaming regulators on the suitability of Pansy Ho as MGM Mirage's partner in Macau. I think New Jersey has billions of reasons to keep MGM Mirage a happy licensee of the state - MGM Mirage Chairman Terry Lanni has promised a "CityCenter East" development on property the company owns next to the Borgata resort it co-owns with Boyd Gaming.

Many folks in the gaming industry think New Jersey regulators are the lone stumbling block to the company's involvement in Macau, and note that the state has made some wacky decisions in the past. If Garden State regulators were to say that MGM Mirage's partnership with Ho would make the company unsuitable to continue as half-owner of Borgata, that could prompt MGM Mirage to sell its interest in Borgata and its neighboring land.

And that could be a big plus for Boyd Gaming - remember, Bill Boyd likes to buy.