Smoking ban concern has Ameristar rethinking expansion

March 25, 2008 6:00 PM
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The Insider by Ray Poirier | Banning smoking in casinos has had a negative effect on gambling revenues to the extent that one company has decided to rethink whether it will go forward with an announced expansion plan.

Ameristar Casinos Inc. (ASCA) said last week it has decided to give further thought to whether it should expand its casino floor in Council Bluffs, Iowa.

The expansion would have added 175 construction jobs and 100 casinos jobs, the company said. The plans called for 600 new slot machines and another 20 table games on the casino’s gaming floor.

But, Ameristar spokeswoman Christie Scott said the company needed to weigh whether the investment makes sense without a permanent exemption from the smoking ban for casinos.

It has become a political matter with the House members allowing an exemption for casinos in its proposed legislation that would ban smoking in all public places. But the Senate’s version of the bill would virtually outlaw all indoor smoking.

Scott noted that in states with smoking bans, there has been a negative impact on casino operations. She says her company expects a similar result if the Iowa legislature bans smoking as well.

Illinois’ smoking ban went into effect at the beginning of the year. Most recently, gaming regulators said smoking had caused about an 11% decline in gaming revenues.

Also reportedly feeling the impact of smoking are the casinos in Atlantic City, although the current regulation permits smoking in 25% of the casinos’ areas. But this week, city officials are expected to once again address a move that would make the casinos entirely free of smoking.

Internet threat

Looks like Canada is developing an anti-Internet gambling attitude similar to that expressed by the politicians in Washington, D.C.

The Canada Justice Department is concerned about the activities of Taiwan-based GigaMedia (GIGM), whose shares trade on the Nasdaq. GigaMedia sells software to online casinos such as its most lucrative customer Everestpoker.com, that is based on a tribal reservation near Montreal.

In recent press reports, the Canadian government is developing a hard line and wants to eliminate the reservation’s Internet sites. Such activities, the government says, are illegal under existing laws.

As a means to "stamp out" the sites, the government is considering restricting banks and credit card companies from conducting financial transactions, a move that parallels action taken by the U.S. Congress.

Pressing on

Despite widespread concerns that there is very little financial support for private equity companies looking to complete previously-announced acquisitions, Penn National Gaming Inc. (PENN) continues to seek regulatory approval for its merger.

Fortress Investment Group LLC and Centerbridge Partners L.P. have an agreement to acquire Penn National for $67 per share. Wall Street’s doubts that the deal will go through has pushed the price of the shares down to the low $40 level.

Still, just last week the company received the approval of the West Virginia Lottery Commission. Previously, regulators in both Ohio and New Jersey gave their blessing to the acquisition.

Under the terms of the agreement, the merger completion date is June 15. However, there are provisions that the acquiring partnership will pay an additional amount per day for every day that the deal is delayed.

Poor timing

Last week, newspapers in Israel reported that plans by Israeli-based Elad Group to get involved in gambling on the Las Vegas Strip would have to be delayed since development cash was hard to come by because of problems in financial institutions.

The timing was embarrassing to the developers since they were in the process of making a presentation to the Las Vegas County Commission that described their plans to build an $8 billion hotel/casino on the site of the former New Frontier Hotel/Casino. They likened the new hotel/casino as something that would be like their Plaza Hotel in New York City.

Obviously, Elad officials vehemently denied the press reports and said that if approved the project would be started later this year.

Commissioners approved the project.

A Political lesson

One thing politicians learn early in their careers is the need to accurately count votes. Apparently, Massachusetts Gov. Deval Patrick, currently in his first term, needed to take an additional course in the subject.

A week before the Massachusetts House began debate on Patrick’s proposal that the state license three casinos the governor told reporters he had the votes necessary to pass the bill. This despite warnings from the powerful House Speaker, Sal DiMasi, that the proposal was going nowhere.

Outsiders, such as Boston area political science teachers were advising Patrick to graciously bow out of the fight that had begun last fall. It was obvious to them that DiMasi’s strong opposition to expanded gambling would bar legislation from getting past his political domain.

Following a 106-48 defeat, Patrick e-mailed his supporters to complain that the casino plan never got an "honest and open debate." He told his liberal supporters, many who were upset that Patrick was supporting gambling, that the state missed a rare chance to meet the challenge of a $1.3 million budget deficit.

Time’s running out

And in Kentucky, where the legislature is watching the clock as its session expires, Gov. Steve Beshear is trying to play the magician by revamping his casino plan.

He told reporters he is working with the Democratic leadership of the House to devise a gambling-expansion strategy that would be more appealing to the lawmakers.

Like most states, Kentucky faces sharp cuts in government services unless new sources are found to increase state revenues. Casinos could be that source but the state constitution specifically prohibits that form of gambling.

Since Beshear took office after making casinos a major platform in his election bid, Beshear has found that like the governors of many other states getting lawmakers to approve expanded gambling is not easy.

THE INSIDER: Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp. (LVS) has been awarded an undisclosed sum of money in a lawsuit he filed against the British Daily Mail newspaper.

Steve Wynn has named Matt Maddox as the new chief financial officer of Wynn Resorts Ltd. (WYNN). He succeeds veteran gaming executive John Strzemp who becomes the company’s chief administrative officer.

Construction has begun on the $350 million slots facility at Philadelphia Park racetrack in Bensalem, Pennsylvania.

Pinnacle Entertainment Inc. (PNK) has received approval for its second riverboat casino resort in Lake Charles, Louisiana.

Architect Ed Feiner has joined Las Vegas Sands as the company’s senior vice president and chief architect.

Zacks.com has reiterated its "buy" rating on the shares of Churchill Downs Inc. (CHDN). It said it was impressed with the company’s recent positioning for future growth.