Aristocrat or Redstone may take WMS buyout bait

Feb 19, 2002 5:35 AM

Aristocrat Leisure, parent of Aristocrat Gaming USA, was the talk on two continents over the weekend.

In Australia, analysts were excitedly pointing to the company’s recent successes and its unexpectedly profitable period for the year 2001. Company statements had led analysts to believe that the annual profit would approach $85 million but the “whisper: number” was said to be closer to $90 million.

Aristocrat is Australia’s largest manufacturer of video poker machines. It also is a major player in the video gaming market throughout the world except in the U.S. where it has a much smaller role than the giant, International Game Technology (IGT) holder of a 70% market share.

But competition between the two could increase sharply if international rumors come to fruition. Word on both the Australian and North American continents has Aristocrat making a bid for WMS Industries (WMS), another major gaming machine manufacturer.

The item was prominently discussed in Gene Marcial’s “Word on the Street” column in Business Week. He noted that prominent Wall Streeter Sumner Redstone and his privately-held company, National Amusements, already owns 30% of WMS. There’s been no indication that Redstone plans to increase his holdings but if he doesn’t move soon, says Marcial, “Aristocrat Leisure may just beat him to it.”

The columnist quoted noted gaming analyst Jason Ader of Bear Stearns as saying that WMS could become a buyout bait, “given the strong balance sheet (no debt and $93 million in cash as of Dec. 31, 2001) and its powerful licenses and brands.”

Last year, Aristocrat acquired Las Vegas-based Casino Data Systems.

Online partnership

Station Casinos Inc. (STN) wasn’t among the bidders for the three Internet online casino licenses granted recently by the Isle of Man but the company has jumped at the chance of becoming a partner with one of the licensees.

The company announced that it has purchased a 50% interest in SunOnline Ltd., a wholly owned subsidiary of Sun International Holdings (SIH), operator of Casino Atlantis on Paradise Island in the Bahamas.

The purchase price was said to be $5 million.

Sun International, the company formed by South African gaming entrepreneur Sol Kurzner and his operating executive son, Butch, was one of three successful bidders for Isle of Man licenses. The other two were MGM MIRAGE Inc. (MGG), which expects to be up and running later this year, and an English-based company. It’s expected that at least two other licenses will be granted.

Although SunOnline is already operating its Internet wagering system, the partnership will not be effective until Station Casinos receives regulatory approval. It’s expected that all will be completed by the third quarter of this calendar year.

For the time being, at least, the Internet site but limit accepting wagers to those countries that approve such gambling. Excluded are wagers from the U.S.

Targeting Chicago

While the wrangling continues regarding a riverboat license for Rosemont, Ill., Hollywood Casinos Corporation (HWD) hopes to capture a good portion of the Chicago-area market with its new dockside casino in Aurora, Ill.

The company announced that it has opened the first half of its new dockside casino, substantially earlier than the previously announced opening by the end of the first quarter.

The new dockside casino will have 53,000 square feet of gaming space on a single level, replacing the property’s existing riverboat casinos that offer 29,500 square feet of gaming space spread out on eight floors of the existing two boats.

Passenger capacity for the gaming facility will be increased by 70%.

“The first half of this new casino in arguably the premier casino in the Chicago marketplace. Once we open the entire facility later this spring, we will unquestionably have the finest gaming facility in the Midwest,” said Edward T. Pratt, chairman and CEO.

A taxing question

The need for additional tax revenue to fund the many projects proposed by Massachusetts lawmakers improves the chances of the Wampanoag Indians to receive approval for a casino.

That plus the “sucking sound of hundreds of millions” being wagered by Bay State residents at Connecticut’s two Indian casinos buoys supporters’ hopes of finally breaking through anti-gambling opposition.

Said Beverly Wright, chairwoman of the Wampanoag Tribal Council, “With Massachusetts facing the threat of deep cuts in these essential services, we believe that a single Native American casino could make an enormous difference for the future economic condition of the Commonwealth.”

Similar comments have been emanating from another Indian Tribe, the Narragansetts of Rhode Island. They’ve been using the same economic language to boost their cause.

The Wampanoags have been eyeing property in the New Bedford-Fall River area of Massachusetts while the Narragansetts would like to be much closer to the Connecticut casinos by locating somewhere right off Interstate 95 in West Warwick, R.I.

Debt review

Not only have Americans reduced their traveling but Europeans as well, says Moody’s Investors Service which has placed the senior long-term debt of Hilton Group plc. on review for possible downgrade.

Hilton Group is the UK-based hotel chain with properties all over the world bearing the Hilton brand name. The company also operates as a wholly-owned subsidiary, Ladbroke, one of England’s premier gambling companies.

Moody’s said it was attempting to assess the extent of recovery in occupancy rates and revenue per available room at properties operated by Hilton Group since the decline in traveling experienced following the September 11 attacks.

“Although we have already seen an increase in occupancy rates since last September, Moody’s is concerned that recovery in business may take longer than originally expected,” the company said.

The Insider

Jockey Chris McCarron has resigned as a member of the board of directors for (UBET), citing the need for his “undivided attention” for the Jockey’s Guild.

A company spokesman said last week that MGM MIRAGE Inc. (MGG) will likely be planning its next project in Atlantic City. The company owns the property adjoining The Borgata, now under construction.

Penn National Gaming Inc. (PENN) will be offering four million shares of company stock on the open market at $30.50 a share. Of these, 2,750,000 are being offered by the company and 1,250,000 by the company founders, The Carline Family Trust.

Bill Schmitt, chief gaming analyst at CIBC World Markets, has placed a “strong buy” rating on Isle of Capri, Inc. (ISLE).

Harrah’s Entertainment Inc. (HET) will receive $26 million from the State of New Jersey in an eminent domain taking of the company’s land needed for the Atlantic City Expressway Connector project.

Jim Gagliano, general manager of Philadelphia Park, will soon leave that post to become head of off-track betting operations for Magna Entertainment Inc. (MIEC).

PDS Gaming Corporation (PDSG) has opened Rocky’s Sports Pub and Grill in Reno. The property formerly was known as The Gambler Casino.

The Mohegan Tribe, operators of the Mohegan Sun Casino in Connecticut, is reviewing its choice of using the embattled auditing firm of Arthur Andersen.

Now that the courts have ruled that the gaming licensing process in Detroit was illegal the Lac Vieux Desert Band of Lake Superior Chippewa Indians have urged the state to take over operations of the three casinos.

Horse racing in New Jersey is in turmoil now that Gov. Jim McGreevey has announced that he will end race purse subsidies.