Is Pinnacle ripe for the plucking?

Dec 8, 2009 5:05 PM
Gaming Insider by Phil Hevener |

Rumors swirl over possible sale/merger

Pinnacle Entertainment shows signs of getting serious looks from prospective dealmakers, people who see the company as being "in play."

These things can happen in a hurry as rapidly changing conditions blow the enticing scent of opportunity this way and that. The November 9th departure of Dan Lee from the CEO’s job at the Las Vegas-based company, may have created the perception of a vacuum looking to be filled by new leadership and/or new ideas about what’s good for shareholder value.

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As one observer described Pinnacle, "There’s a good deal of value." The stock price has spurted upward above $10 a share during the month since Lee departed.

What this may mean is that interim CEO John Giovenco will continue his "search" for a permanent replacement as he also field calls from people who, well, who knows what anyone might care to discuss?

Yes, I know non-executive interim chairman Richard Goeglein has reportedly said there is nothing of the sort in the works, but that kind of statement is often part of the chess game that can make these merger and acquisition sagas so interesting.

A Pinnacle that is perceived as buyable would get the attention of executives such as Penn National CEO Peter Carlino’s attention. If Penn is interested in Pinnacle, Carlino would have a much easier time sitting down with Giovenco rather than Lee.

Perhaps a decision by the board to put the company up for sale had something to do with Lee’s unexpected departure. It’s hard to believe Lee getting a bit "snarly" with a St. Louis County commissioner was sufficient by itself to force his departure.

No single individual owns enough of Pinnacle to dictate its direction and the current board members are very bright gaming veterans whose biggest challenges are probably behind them. The chance to do something for shareholders now as opposed to a few years down the line, may have strong appeal.

Then there is the issue of personality chemistry that can have a big impact on company policy.

Remember when Pinnacle and Penn were beating up on each other as Pinnacle was waging its successful battle to build a casino in Baton Rouge, a locale that Penn was serving with what Lee sneeringly labeled a "first generation" casino?

So we’ll see what happens as Giovenco spends time with possible suitors. Whatever happens to Pinnacle, Giovenco, the former top executive back at Hilton Gaming years before it bought Caesars and then absorbed by Harrah’s, has a wonderful chance to assume the sort of center stage position he might have thought had passed him by.

During the days just after Lee’s departure when it was announced that Giovenco would move up from his seat on the Pinnacle board to become the interim CEO, speculation centered on whether Giovenco would take the job himself or root for a replacement to be found quickly so he could slide back into retirement.

People who have asked him about his interest have been getting responses like, "I’m 74, what do I want with a fulltime job?"

That’s an interesting non-response. Carl Icahn is 73, Warren Buffett is 79 and Kirk Kerkorian is north of 90 – all three appear to remain reasonably active.

Giovenco may be keeping all his options open for the moment, maybe waiting to see if he can swing a deal that will benefit Pinnacle shareholders as he keeps interviewing prospective CEO candidates for a job that may or may not exist. The former Hilton executive has been described as the "consummate corporate animal," another way of saying that he has a strong ego and is perhaps not yet sure what he wants to do with this opportunity that was thrust his way when Lee left.

But it is difficult to believe that Giovenco, being the man he is, has not aimed a thoughtful look at that thoughtful face in the mirror and played out the possibilities in his head. The resort business does not stand still. The process of change is always at work, the doors to new opportunities opening as other doors close.

I’m guessing Giovenco is well aware of that, just as he also realizes that the need to enhance shareholder value in a public company is everything.

Which makes timing critical as senior executives play the chess games that are at the heart of merger and acquisition efforts.

Question? Comment? E-mail me at: Phil Hevener