Looks like Pinnacle has raised its offer for Aztar again:
At some point this deal is not accretive and they'll have to walk away... I'm surprised they've gone this high as Pinnacle's Lee is a very balanced guy and concerned about shareholder value.
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Dan Lee is a "balanced guy" as you put it, but he is also going to be very aggressive (as a shareholder I would expect no less from him). The deal could be accretive at higher prices yet � one part of the �accretion� factor is the cost of financing. As Dan stated in the latest conference call, when they arranged the initial financing for the deal (the $3.4 billion) they where conservative with the EBIDTA guidance that they presented to their bankers (I�m guessing for all properties, but certainly with New Orleans and L�Auberge from what was said on the conference call). The other important issue is the synergies (cost and revenue). I�ve only seen one research report, but it had synergies of $15 million and estimated the deal would be accretive to 2007 earnings per share at a price of $48 per share (I think the report is likely flawed � the EBITDA figure looked to low to me � the same analyst had them with about $47 million in EBITDA for the quarter they just announced � which came in just below $60). The synergies represented corporate costs that would disappear (total estimate of corporate cost for Aztar was about $18 million, they assume � correctly � that not all overhead will disappear). I would think the savings/revenue synergy should be somewhat higher (my initial guess is in the range of $35-40 million given the cross marketing opportunities and the slot upgrade that could be given to the Trop Las Vegas). I�m not sure exactly where the tipping point is here, but then again I�m still not convinced Columbia really wants to do a deal for Aztar (I think they face a real challenge in getting licensed, especially in Missouri given their track record there; also the very sizable non-refundable �deposit� seems to good � if they are so certain they can close the deal, why are they providing such a large break-up fee to Aztar? All they need do is make the highest offer).
Thanks for the insight. I agree that this will be interesting to see where it goes.
Of course it is possible that Pinnacle could divest some of the new Aztar assets or even some of their existing assets if what they really want are the two Tropicana properties (LV and AC).
Jeff Simpson in today's LV Sun with a great quote:
"Aztar employees should prefer Las Vegas-based Pinnacle Entertainment and its imaginative top executive Dan Lee to emerge as the winning bidder. Kentucky-based Columbia Sussex owns a collection of second-rate and castoff properties in its casino portfolio, while Pinnacle already has built the best property in Lake Charles, La. and will eventually operate the best properties in the St. Louis area."
It's unbelievable that this has been going on for two months and still not resolved. PNK offered $38 for AZR on March 13. The latest is $54 cash from Columbia Sussex. In my opinion, PNK should take the $78 million in breakup fees and move on. The bidding has gotten out of control and who knows whether Columbia Sussex will have any licensing problems.
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