Features
Pinnacle Gambles On Aztar
Pinnacle said it will pay about $1.45 billion for Aztar. The acquisition is expected to be complete by the end of the year. Pinnacle had $726 million in revenue last year; Aztar had more than $915 million.
The purchase will create a nationwide casino network that will bump Pinnacle from the 10th largest to sixth largest U.S. casino operator.
“It moves us rather dramatically up the ladder in terms of size,” company CEO Daniel Lee said. “In terms of geographic reach, it really probably becomes second only to Harrah’s in the industry.”
One crown jewel is the prime location of Aztar’s Tropicana casino in Las Vegas. Lee told The Wall Street Journal his company will be investing more than $2.5 billion into the site. The Tropicana opened in 1957 and might not be up to par with its neighbors, but it sits on one of the busiest street corners in Sin City.
However, the WSJ cautioned that breaking into the Vegas market would have its hurdles. MGM and Harrah’s have established properties nearby, including Mandalay Bay, Excalibur, Luxor, Bellagio, MGM Grand and Caesars Palace.
Meanwhile, Boyd Gaming is developing the $4 billion Echelon Place and MGM Mirage is building the $7 billion Project City Center. Several Harrah’s properties are also expected to be redeveloped.
Lee was the CFO for Steve Wynn’s Mirage Resorts for seven years before joining Pinnacle in 2002. He told the WSJ his experience with Wynn will be a valuable tool.
“We need to build something that is a must-see attraction like Steve does,” Lee said. “Something where someone staying across the street at the MGM Grand would look at our property and say, ‘Wow, I really need to go over there and see what that’s all about.'”
Lee said he expects 25 percent of the companies’ combined profit to come from Aztar’s Tropicana property in Atlantic City, N.J.
Morgan Stanley and Co. analyst Celeste Brown said in a research note that the value of the deal was “at the high end of any range we had expected.”