Two Way Hard Three | Las Vegas Casino & Design Blog

May 20, 2006

Tropicana Bidding War Finally Over

Posted by Hunter

Columbia Sussex has won the 6 week bidding war that erupted over Aztar Corp., owners of the Tropicana properties in Las Vegas and Atlantic City, amongst other properties.

The WSJ has the story (subscription required):

From the article:

"The casino affiliate of closely held Columbia Sussex Corp. emerged victorious in a two-month bidding war by agreeing to acquire casino operator Aztar Corp. for $1.94 billion, a deal that underscores the scarcity of available development opportunities on the Las Vegas Strip.

Columbia Entertainment will pay Aztar $54 a share and assume roughly $676 million in Aztar's debt, giving it control of Aztar's Tropicana flagships in Las Vegas and Atlantic City, N.J., as well as other gambling properties. Columbia Entertainment has also deposited $313 million in a bank account, which it will use to pay Aztar should the deal fall apart if Columbia Entertainment fails to meet certain criteria, including obtaining a casino license in New Jersey."

The other serious bidder, Pinnacle Entertainment, dropped out of the race as the price reached levels that made less and less sense financially. It has been rumored that Pinnacle is looking at the site of the Sahara on the North Strip as another option for a new resort in Las Vegas.

More Details from Various Papers:

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Read archived comments (6 so far)
May 21, 2006 5:10 PM Posted by mike_ch

The real winner here is Pinnacle, who actually receives millions of dollars for NOT winning the price war!

That seems downright backwards to me.

May 21, 2006 7:52 PM Posted by Hunter

With all those legal fees it seems reasonable to me. Gotta be taken seriously to put that work in and $$'s seems to be the only way to get people to take you seriously these days.

May 22, 2006 4:53 PM Posted by detroit1051

Pinnacle is disappointed not to get the Tropicana's south Strip property, but I'm glad they didn't overpay. I'm still not convinced Columbia will find it easy to close the deal. Columbia's casinos aren't exactly pace setters:

Westin Las Vegas Casuarina Casino, Las Vegas, Nevada (operated by Wimar Horizon)
River Palms Casino, Laughlin, Nevada
MontBleu Resort Casino & Spa, Stateline, Nevada (being renamed to MontBleu Resort Casino & Spa)
Lake Tahoe Horizon Casino, Stateline, Nevada
Jubilee Casino, Greenville, Mississippi
Lighthouse Point Casino, Greenville, Mississippi
Vicksburg Casino, Vicksburg, Mississippi

Dan Lee can make a down payment on either Sahara or Riviera with his fee from Aztar.

Yesterday's LV Sun had an interesting article on possible mergers, but it would be difficult for either MGM or HET to get approval to control the locals market:

If the economy falters and real estate pulls back significantly, Columbia may really have overpaid.

Fascinating business!

May 22, 2006 5:02 PM Posted by Hunter

I saw the Sun article as well and while some of it makes sense, I still think WYNN would be near impossible to take over given the factors we've discussed before (insiders own 50% of the stock, strong poison pill provisions).

May 22, 2006 5:12 PM Posted by detroit1051

I agree on Wynn, but the Fertitta family and the Boyds may be willing to let HET or MGM pay them an astronomical sum.

May 24, 2006 8:58 PM Posted by Steve S

detroit1051 - you're not the only one questioning Columbia's ability to close the deal. Take a look at where Aztar's stock is trading - it closed up today - all the way to $51.81, on an ALL cash bid of $54.00 (the gain today was probably due more to the news from Illinois that Columbia are buying the Casino Queen, which interestingly enough is just across the river from Pinnacle's City project in St. Louis). Given the dropped bid in Missouri for the President Casino, getting approval from the gaming commissions could be extremely difficult and time consuming. If, and this is looking like a BIG IF, they can close the deal, it will not happen this year. From reading various sources, 6 months would be very quick, and given that as of last week they hadn't submitted anything to Indiana and New Jersey to start the process I think they have to look at the first or second quarter of next year at the earliest - they'll have to pay some of that additional per day amount (wonder if as this drags on they'll drop this acquisition and sue someone?). Not sure when they will submit for licences either - will they wait until the Missouri property is sold (the deal can't be done without that being sold, and Columbia has stated they will not seek a licence in Missouri)?

Pinnacle wins on this round - they got $52 million for themselves and may still get the properties if Columbia can't close.

As a side note, it appears that Columbia is planning on splitting the Las Vegas site into 2 or 3 properties according to some principles of Columbia Sussex (seems like something they'd makes NO sense). Also, the financing doesn't leave much for improvements - its only $3.15 billion and that might not be enough to close the deal at the end (that per diem is going to start adding up in a hurry, and the deal itself will be around $2.8).

The big losers in this deal are the Aztar employees - I can't see Columbia being able to operate sucessfully in A.C. or Las Vegas.