Earlier in Part 1, we noted that an SEC filing by the controlling shareholder of Motley Fool Hidden Gems selection Ameristar Casinos
That out of the way, we also began a look at prospective buyers -- namely, MGM Mirage
A similar argument can be made for Las Vegas Sands as the one that was made for MGM Mirage. While some investors may be preoccupied with what LVS is doing in Macau, the Las Vegas Strip, and elsewhere around the globe, it's easy to overlook the fact that LVS is building a regional casino in Bethlehem, Pa., near New York City. In addition, LVS is also in the running for a casino on the Kansas side of Kansas City, a market where Ameristar is the dominant casino operator, and I believe that LVS' convention-based business model makes the company a near lock to pursue an opportunity along the Mississippi Gulf Coast in the future.
That said, while LVS has no apparent need for help for its Strip properties and the company has not expressed the intent to build a national network, Ameristar would be both a perfect fit and a good start.
Boyd Gaming would be another glove-like fit. Boyd has what Ameristar needs with its Echelon Place project on the Las Vegas Strip. Meanwhile, Ameristar's regional operations would be an instant upgrade for Boyd while filling out its national network, and the only overlapping locale would be the Indiana portion of Chicagoland. Boyd took a similar leap forward just a few years ago with its purchase of Coast Casinos.
Although Ameristar might be too big a target for Pinnacle Entertainment to acquire outright, I think a merger of equals via share swap makes interesting strategic sense for a number of reasons.
For starters, although neither company has a Las Vegas property, a combination would yield the beginnings of a dominant regional network with a hand in virtually every key riverboat market with the exception of Tunica and the Mississippi Gulf Coast. While Pinnacle is somewhat competitively challenged by virtue of its locations in Bossier City and New Orleans, Pinnacle has the deepest footprint of any casino operator in Louisiana and the dominant operations in Lake Charles and Baton Rouge, assuming the latter project is approved. Pinnacle would also bring its Atlantic City project to the equation.
Like LVS, Pinnacle is also competing for a license to build on the Kansas side of Kansas City. Otherwise, the only place of overlap is St. Louis, where Pinnacle has one casino project due to open downtown in December, and another in South County slated for a 2009 opening. The latter project could easily be pawned off to St. Louis-based Isle of Capri
Just as importantly, I believe such a union would be a merger of corporate talent. Ameristar has an expertise in casino operations and a system that works. Pinnacle has CEO Dan Lee, the guy who, as CFO of Mirage Resorts under Steve Wynn, engineered the acquisition of the land that MGM Mirage's Project CityCenter sits on. And while Pinnacle eventually lost out on its acquisition bid for Aztar Corp to Columbia Sussex last year, as well, Lee enabled Pinnacle to walk away with a $78 million merger termination fee simply by getting to Aztar first. Lee also swung the deal with Harrah's Entertainment
I think Dan Lee's savvy and Ameristar's operational excellence would make an excellent match. It doesn't hurt that both companies are headquartered in Las Vegas, either. Meanwhile, Ameristar would bring a dominant locals brand, while Pinnacle has already demonstrated a penchant for the exotic resort with its Lake Charles property and downtown St. Louis project.