Rio deal?

Mar 30, 2010 7:02 AM

This may not be the time for resort companies to sell quality assets for anything less than the best possible price, what with the economy edging toward a revival.

That’s the general shape of thinking that may have led to Penn National Gaming’s (PENN) offer for the Rio falling off the radar. A sale of the Rio has been periodically rumored for several years, ever since Gary Loveman agreed it was the most likely of the company’s Las Vegas resorts to be sold, assuming anyone came up with an acceptable offer.

Penn apparently did exactly that late last year and unofficial sources say Harrah’s even agreed to a condition that would keep the World Series of Poker at the Rio for a year or two – assuming a sale materializes.

Will it materialize? A sale to Penn had been expected to come together by about the end of the year – last year. Well, the end of March is close to the end of the year.

What happened? I asked one source.

His response: "I don’t know. It’s like the whole thing just disappeared."

The "financial engineering" that saw Harrah’s post company-wide increases in revenue from operations during the last three months of 2009 may also have bolstered the willingness of TPG Capital and Apollo leaders to wait and see what the next few months bring.

Another factor: Harrah’s execs are said to be suddenly wary about creating unnecessary competition by selling Penn what would be its first destination resort in the Las Vegas area.

Both Penn and Harrah’s do good jobs of selling slot machine entertainment in regional casinos in a number of states. They cater to slot players in some of the same markets. Both have developed large databases of middle market slot players but Penn is not yet able to offer these customers a travel destination in Las Vegas.