Pennsylvania to rival Strip
with 61,000 slot machines

Jul 6, 2004 5:26 AM

When Pennsylvania Gov. Ed Rendell proposed that his state join the movement toward placing slot machines at his state’s racetracks, little did he envision that the final bill, when implemented, would have his state rival the Las Vegas Strip for the number of machines in play.

But that’s what Pennsylvania lawmakers approved over the weekend, a law that authorizes slots at 14 locations, seven at racetracks either currently operating or on the planning board; two others to licensees yet to be selected, and the others at resorts or off-track betting sites.

Racetracks will be permitted to operate up to 3,000 machines with some of the other sites limited to 500 machines. In total, the new law authorizes as many as 61,000 slot machines, the largest of any state other than Nevada.

The action is sure to add pressure to lawmakers in nearby Maryland and Ohio, both of which have been debating the racetrack slot issue for some months. It could be that rather than face the issue directly, the two states could pass bills permitting the voters to signify their approval on the November ballot.

The Pennsylvania action is expected to be a bonanza for the major slot manufacturers such as International Game Technology (IGT), Alliance Gaming Corp. (AGI), and WMS Industries (WMS). It also should benefit racetrack operators in the state such as Penn National Gaming Inc. (PENN), and Magna Entertainment Corp. (MECA).

Deal crumbles

Terry Lanni, chairman and CEO of MGM MIRAGE Inc. (MGG), has experienced the situation when the loser actually is the winner. When he was calling the shots with Caesars World, Lanni was the unsuccessful bidder for a gaming license in New Orleans. He then watched the winner, Harrah’s Entertainment Inc. (HET), struggle with the license for the next decade.

History may be repeating itself in England. MGM MIRAGE was outbid for dog track owner Wembley Plc by a consortium called BLB Investors, whose participants included Starwood Capital, a subsidiary of Starwood Hotels & Resorts Worldwide Inc. (HOT), Kerzner International (KZL) and the developer Waterford Group.

On Monday, BLB Investors announced it was pulling out of the Wembley deal, causing the track operator’s shares to lose a third of its value in stock market trading.

Cause of the BLB Investors action came from Rhode Island where lawmakers passed a bill permitting voters to decide whether Harrah’s and its partner, the Narragansett Indians, should be permitted to build a Las Vegas-styled casino in West Warwick. The casino would be taxed at a much lower rate than Wembley’s biggest money-maker, Lincoln Greyhound Park, operator of some 3,000 slot machines.

There was no word on Monday from MGM MIRAGE whether they planned to re-enter the Wembley chase, although analysts believed the offer would be much less than their previous bid of $540 million.

M&A time

Regulatory approvals behind them, Boyd Gaming Inc. and Harrah’s Entertainment Inc. (HET) have expanded their operations with the acquisitions of Coast Casinos Inc. and Horseshoe Gaming Holding Corp., respectively.

For the time being, the addition of these gaming companies will alter the companies’ relative position among their peers. Harrah’s vaults to the forefront as the country’s largest gaming company while Boyd Gaming moves up to fifth largest.

Looking to take the No. 1 spot is MGM MIRAGE Inc. (MGG) with its proposal to acquire Las Vegas strip giant Mandalay Resort Group (MBG) for $7.9 billion.

For a number of years, Boyd Gaming wasn’t considered among the major players in the Las Vegas market. In fact, at the beginning of the 21st century its shares were selling for $5 and change. Within two years, the share price moved up to the mid-teens before taking off in the past year.

Helping drive revenues was the acquisition of Delta Downs Racetrack and Casino in Louisiana. And that was topped with the opening in July 2003 of the Borgata Hotel/Casino in Atlantic City, a property that Boyd Gaming owns in partnership with MGG.

Boyd Gaming now adds Coast Casinos’ five Las Vegas properties to its seven operations. It also has gaming properties in Mississippi, Illinois, Indiana, Louisiana and New Jersey.

As for Harrah’s, the addition of the gaming properties in Hammond, Ind., Bossier City, La., and Tunica, Miss., that were developed by Jack Binion, propels the company to a temporary leadership in the gaming industry with combined revenues of $5.1 billion.

The Harrah’s acquisition took a bit longer than that of Boyd Gaming since it had to pass muster with the Federal Traded Commission because of the proximity of some of Binion’s properties to its own.

Harrah’s share price closed on Friday at $54.57 while Boyd’s shares traded at $27.49.

THE INSIDER: Jim Gagliano, a part of the management team at Magna Entertainment Corp. (MECA) has been named executive vice president of the Maryland Jockey Club, whose majority owner is Magna Entertainment.

Riverboat casinos in Iowa are no longer required to cruise the Mississippi and Missouri rivers. The law requiring the cruising expired on July 1.

Argosy Gaming Corp. (AGY) has negotiated an agreement with the city council of Lawrenceburg, Ind., that grants the company a reduction in taxes of up to $5 million for a decade, provided it reinvests its tax credits into improvement to its property.

International Game Technology (IGT) has signed a $1.5 billion credit facility with a syndicate of banks.

Horseshoe Gaming Holding Corp., now a wholly owned subsidiary of Harrah’s Entertainment Inc. (HET) has called for redemption of all $535 million of its outstanding 85/8% senior subordinated notes due July 2009.

The Pacific Exchange now trades options for two gaming companies: Wynn Resorts Inc. (WYNN) and Shuffle Master Inc. (SHFL).

Nevada Gold & Casinos Inc. (UWN) has increased the company’s borrowing power by signing a $40 million revolving credit facility.

The Missouri Gaming Commission has postponed a decision of a new casino for the St. Louis area because it said more time is needed to study the proposals.

Washington, D.C., Mayor Anthony Williams said he will sign a petition to permit the voters to authorize a casino but will vote against the proposal because he’s anti-gaming.

Publisher Lyle Stuart of Barricade Books has submitted a written apology to Steve Wynn as part of a settlement of a lawsuit brought by Wynn for libelous statements made in an advertisement for an unauthorized biography.

Kerzner International (KZL) and its partner, Istithmar PSJC have announced an agreement to expand it’s The Palm development in Dubai by 2,000 rooms.

Galaxy Resort & Casino has opened its Galaxy Waldo casino in Macau.

The California legislature has approved Gov. Arnold Schwarzenegger’s recently negotiated gaming compacts with five Indian tribes that would provide $1 billion to the state this year while removing the cap on the number of slot machines the tribes can operate.