It’s back to business as usual for Ameristar Casinos, whose board decided “a sale is not in the best interests of the Company and its stockholders at this time.” Which is a nice way of saying there’s no bidding war to be had for Ameristar, the lucrativity of its assets notwithstanding. J.P. Morgan analyst Joseph Greff opined “there was little interest from third parties in buying the entire company by either casino operators or private equity at prices much higher than the $18+/- share price range.”
The problem, according to Greff is that the company is too well-run, generating some of the industry’s highest cash-flow margins and with little room for increased efficiency. He thinks the board may subsequently attempt to peddle the better-performing casinos piecemeal, which seems foolish (good luck unloading the lesser assets if you go that route, ASCA) but it’s not my money. An estimated $327 million in 2012 cash flow implies a $2.29 billion ASCA-ing price for the whole company, although the dominant position held by Ameristar in markets like Kansas City (above) and Council Bluffs — where it’s been cleaning Caesars Entertainment‘s clock — argues for an ever higher bid.
Although Boyd Gaming presented a logical buyer, in terms of what markets it’s in and where it might like to be, it’s also pretty risk-averse at present and one suitor doesn’t a bidding war make. Penn National Gaming has been spending pretty freely but its stockholders might balk at an acquisition that competes with several of Penn’s existing casinos and bondholders would certainly raise similar objections if Caesars — for whom an Ameristar buy would be even more redundant — tried to get into the running. (Station Casinos is a non-starter for obvious reasons, even though Ameristar’s political mastermind, Troy Stremming, used to work for Station.) That just leaves the private equity scoundrels and, as Greff notes, there’s scant opportunity for rape and pillage where Ameristar is concerned.
Another Macao crackdown. In announcement that will cause Caesars CEO Gary Loveman‘s heart to sink, Land, Public Works & Transportation Bureau Director James Carion disclosed that “there will be no more land plots granted for casino projects without a public tender after a new land law comes into effect,” probably the year after next. If Caesars hasn’t written off the Macao golf course that has become a $577 million albatross around its neck, now may be the time to do so.
According to Stern Agee analyst David Bain, “it seems somewhat unlikely” that pending land-grant requests by Steve Wynn, Stanley Ho, and MGM Resorts International and Pansy Ho (left) will be heard for as much as a year. However, Bain believes that this is a long-term plus, as the new law will bring greater transparency to the land-grant process, currently tinged with accusations of favoritism toward favorite son Sociedade de Jogos de Macau. The analyst even sees an upside for Sheldon Adelson, in that the tightening of land grants is in line with Peking‘s call for economic diversification, putting some of the same crimps on Wynn, the Ho clan and others that have descended upon Adelson himself, “though the Government still may have killed two birds with one stone with [denying Cotai Strip™ Sites] 7 & 8, we may never truly know.” Those last five words are the truest ever written about operating a casino in Macao.
Bain pegs Wynn and MGM as short-term losers, the former because he’d indicated readiness to plunge his shovels into Cotai, the latter because expansion was part of the appeal of its much-delayed Hong Kong IPO. Throw in comments by Secretary of Economy & Finance Francis Tam that freezes on casino capacity would prevail into 2013, and it’s pretty clear that China is attempting to corral the runaway economic horse that is the Macanese casino industry.
(Thanks to S&G reader SanFranciscoAndy … whoever you are.)
