Casino companies now singing ‘Hooray for Hollywood’

Mar 19, 2002 6:39 AM

While Illinois lawmakers Âí­attempt to resolve the dispute revolving around the state’s 10th and final gaming license, major gaming companies have been sniffing around a little company called Hollywood Casino Corp (HWD).

The appeal for this company with gaming properties in Âí­Illinois, Louisiana and Mississippi has been its Aurora, Ill., Âí­facility that sits near the lucrative Chicago market. Since the projected 10th license for the Chicago-suburb of Rosemont has become the proverbial “hot potato,” major gamers have been looking for an alternative.

That just may be Hollywood Casino Corp. whose share price has risen from the upper single digits just three months ago to Monday’s closing of $16 a share.

HWD officials, embroiled in a lawsuit with prior management, has made no secret of its interest in seeking a white knight. Its current market cap of $400 million, plus accumulated debt of $435 million, probably would necessitate an acquirer to consider a bid of $1 billion.

Believed to be among the companies that would be prepared to bid for the company are the rapidly-expanding Penn National Gaming Inc. (PENN), whose success in West Virginia as well its Mississippi Gulf Coast acquisitions, has pushed its share value from a languishing $10 a share to a more current mid-30’s area; Ameristar Casinos Inc. (ASCA), also a success story since buying two Missouri casinos from Station Casinos Inc. (STN), and Harrah’s Entertainment Inc., the industry’s most diversified operator.

Also listed as a potential suitor is MGM MIRAGE Inc. (MGG), whose efforts to resolve the Rosemont dispute by acquiring the controversial Âí­license of Emerald partners with a substantial payment to the state treasury were rebuffed. If the Rosemont site is finally rejected by state officials, the Aurora facility will grow in attractiveness, especially if acquired by a company with the resources to expand it into a first-class facility.

Missouri booming

If there has been an economic slowdown in the U.S. during the past year, no one has told the 11 casino operators in Missouri. For the month of February, these gaming properties reported net revenues of $103.9 million, up from the $87.1 million reported a year earlier.

True, the state has added two gaming properties since last year. They are the Mark Twain Casino in the northeast Missouri town of La Grange and the Isle of Capri Casino in Boonville in mid-Missouri. Together, these two casinos generated $7.45 million of the $25.1 million increase reported by the state.

Showing continued robust business were the casinos in the St. Louis area. The President Casino in Downtown St. Louis had earnings of $7.45 million and Ameristar St. Charles Âí­reported $13.07 million, both records for the individual properties.

Officials said a surge in nickel slot machine usage contributed to the February increase.

No lucky lady

The Lady Luck Hotel/Casino failed to live up to its name for the Isle of Capri Inc. (ISLE) that purchased the property less than two years ago. So the company said last week, it would sell the Downtown Las Vegas property, as well as a struggling casino in Tunica, Miss. The company will then take a charge of $34.5 million or $1.18 a share in the fourth quarter that ends on April 28.

A company spokesman said the Lady Luck property was struggling and “in the long run” it was not in the best place for the company to be. He said the company would not close the property since there have been inquiries from potential buyers.

Late last year, Fitzgerald’s cently, it was announced that the Four Queens, another Downtown property, also would be sold.

Budget needs

Unable to meet its budget needs, the Kansas legislature will take up this week bills that will allow slot machines at the state’s dog tracks as well as dozens of veterans’ clubs across the state.

Language in the legislation also provides for an “at large” casino at an undetermined site.

However, opponents to the expansion of gambling in the state say that bickering among the gambling advocates on how to split the revenues may have doomed all gambling expansions.

Current language would permit the racetracks to keep 63.5% of the net win while 28% would go to the state’s general fund. The other 8.5% would be divided between increases in purses at the tracks and other state projects.

The Insider

Four riverboat operators have been fined by the Indiana Gaming Commission for permitting underage patrons to gamble. Fined a total $10,600 were: Caesars Indiana in Harrison County, Belterra Casino near Vevay, Casino Aztar in Evansville, and Trump Casino in Gary.

Gaming Analysts at Jefferies & Company have upgraded Ameristar Casinos Inc. (ASCA) from accumulate to buy.

The two Indian casinos in Connecticut paid the state $30 million as its share of the $120 million revenues generated by slot machine play during February. Foxwoods Resort Casino with 6,641 slot machines, reported a net slot win of $65.2 million and Mohegan Sun reported $55.1 million from its 6,198 machines.

Mandalay Resort Group (MBG) and Park Place Entertainment Corp. (PPE) have joined a partnership with the Stephens Media Group for the development of a website.

Harrah’s Entertainment Inc. (HET) and Hilton Hotels Corp. (HLT) have been added to the prestigious Zacks’ All-Star Picks.

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

Moody’s Investors Service has assigned a B2 rating to Resorts International’s $175 million first mortgage notes with a stable ratings outlook.

Colony Capital, the privately-held gaming company based in Las Angeles, Cal., and operators of casino in Atlantic City, N.J., reportedly has bid $350 million for the Aladdin Hotel/Casino on the Las Vegas Strip. The $1 billion property has been operating with bankruptcy protection and has been placed on a sell list by its current operators