We already have last month's merger agreement between MGM Mirage
So why not Station Casinos
Pretty much every casino stock has gone through the roof over the past year, but Station is the one that I regret not buying. Station, which reported another strong quarter of growth this morning, is one of the longtime leaders among the "locals" casino operators in Las Vegas, as well as being a pioneer in the concept. It also has a very successful business in developing and managing Native American-owned casinos.
Station competes by developing large, multifaceted properties closer to home and by offering a wide variety of entertainment and dining options. That means attaching such things as movie theaters and bowling allies to the casino, and everything from Fatburger in the fast-food court at virtually every Station Casino to the buffet and to high-class dining at its jointly owned Green Valley Ranch.
And it works.
For the second quarter, earnings adjusted for one-time items more than doubled to $0.52 per share. Quarterly EBITDA was up 37% year over year to $93.4 million, and the company's 35.6% EBITDA margin ranks it as an industry leader -- and is a testament to the benefits of being in the locals business.
I guess the real question is who Station would make sense to, if it's even for sale.
One obvious answer is Harrah's, which would like to establish a local presence in Las Vegas. Harrah's is no stranger to the locals concept, with its 26 casinos across the country. And with its recent acquisition of Horseshoe Gaming (see Harrah's Gains, Gamers Lose), Harrah's now has three casinos targeting the Chicagoland market -- so it basically competes in that market the same way as Station does in Las Vegas.
But another partner that might make some sense is riverboat pure-play Ameristar Casinos
What's more, Ameristar -- which is also rumored to have shown interest in Coast Casinos prior to its sale -- has done business with Station before: At the end of 2000, Ameristar acquired its two flagship properties in Missouri from Station (Ameristar Kansas City is the spitting image of Station's Sunset Station in Henderson, Nev., if you can imagine it), and Ameristar sold what is now Fiesta Henderson to Station as part of the exchange.
Ameristar is also a net acquirer on the prowl, having recently purchased the Mountain High Casino in Black Hawk, Colo. (see Ameristar's Land Grab).
At this point, Ameristar and Station are very similar companies. But where Station dominates the Las Vegas locals markets, Ameristar has key positions elsewhere. That said, there seems little in the way of synergy -- at this point. What would really make the two attractive partners is if Station were to have a resort-style presence on the Las Vegas Strip that Ameristar could feed its customer base into -- something that both Harrah's and MGM Mirage/Mandalay benefit from (see The Logic of MGM-Mandalay).
But who knows? I may be pushing it, but with all the mega-merger activity around the casino industry in recent months, nothing seems impossible.
Fool contributor Jeff Hwang owns shares of Ameristar Casinos.
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