Jeff Simpson predicts some major gaming acquisitions we may see in near future

Sunday, May 21, 2006 | 7:39 a.m.

The biggest casino operators have achieved their status not by building new resorts but through mergers and acquisitions.

Harrah's Entertainment acquired the Rio, Horseshoe Gaming Holdings, Caesars Entertainment and the Imperial Palace on its way to becoming the industry's biggest player.

Kirk Kerkorian's MGM Grand swallowed Primadonna Resorts, Mirage Resorts and Mandalay Resort Group on its way to becoming the Strip's kingpin, MGM Mirage.

That record suggests that it would be foolish to believe that the industry titans will rely only on their announced or expected plans to build giant casino resorts on the Strip and overseas to fuel their growth.

Recently announced deals involving a couple of Las Vegas properties, the Hard Rock Hotel (to boutique hotelier Morgans) and Tropicana parent Aztar Corp. (to Westin owner Columbia Sussex Corp.), are doing more than confirming the rapidly escalating value of Las Vegas gaming real estate.

The sales make clear just how savvy the earlier Harrah's and MGM purchases were. Most folks applauded MGM's Mirage and Mandalay deals, but many industry insiders questioned the price Harrah's paid for Horseshoe and Caesars.

I wasn't one of the detractors - I thought Harrah's CEO Gary Loveman made shrewd deals, acquiring strong brands and relatively scarce gaming licenses, cementing its top-dog status in the central region of the country while establishing itself as a solid No. 2 on the Strip.

With the continuing red-hot performance of the Las Vegas casino business and rapidly escalating prices for Strip-area casino real estate, there's absolutely no doubt now that the Harrah's Caesars deal was a coup - a deal that would cost billions more if attempted today.

What current buying opportunities might Harrah's and MGM Mirage be considering? I'm privy to no inside information, but I think a couple of companies might make sweet acquisition targets for the top two players. The prices would be high given the industry's current strength, but the rewards would be great.

Target No. 1: Station Casinos. Harrah's Loveman made a play for both Station and Coast Casinos (eventually gobbled up by Boyd Gaming Corp.) a couple of years ago but couldn't agree on a price. For Loveman, these truly were prize catches that got away. Station's stock price went far higher, and the company maintains its stranglehold on the Las Vegas locals market.

Loveman has made no secret of his desire to capture a chunk of the lucrative Las Vegas locals market, and with Station's arsenal of properties and inventory of casino-entitled sites primed for development, the fit seems obvious.

The question, of course, centers on price, and you can bet Station would sell for a tasty premium. Station owner, the Fertitta family, has already proved its willingness - a deal to sell to a Texas-based real estate investment trust collapsed in 1998.

Station would be a perfect fit for Harrah's, but, if Loveman passes again, rival MGM could pounce.

Target No. 2: Boyd Gaming Corp. Boyd Chairman Bill Boyd has never expressed an interest in selling, but the company has a couple of prize assets MGM Mirage in particular would covet. MGM shares ownership of the Borgata resort Boyd operates in Atlantic City, Boyd's solid second-place standing in the Las Vegas locals market and its Stardust site.

MGM has in the past shown an appetite to acquire companies that were MGM partners in casinos, buying New York-New York partner Primadonna and Monte Carlo partner Mandalay. Borgata is unquestionably Atlantic City's best property.

Harrah's central U.S. dominance would overlap with Boyd's riverboat presence, and Harrah's already has a giant stake in the Atlantic City market. But the lure of Boyd's Las Vegas locals and Strip assets could prove irresistible.

Target No. 3: Wynn Resorts. Steve Wynn tells me he's not interested in selling, but his company's two prized assets might make for an offer he couldn't turn down. The Desert Inn parcel has space for a handful of resorts beyond Wynn Las Vegas and Encore.

And Wynn's Macau casino concession is undeniably worth billions, especially to Harrah's, which has been shut out of the lucrative enclave, although is believed to be angling for a Macau venture with Wynn.

Kerkorian timed his last Wynn buyout when the market was soft. He'd get no such price advantage this time, but the multibillionaire has already demonstrated a willingness to spend big to get what he wants.