Pinnacle-Ameristar Under One Roof - Analyst Blog
December 24 2012 - 7:00AM
Zacks
Pinnacle Entertainment
Inc. (PNK) recently inked a definitive acquisition
agreement with Ameristar Casinos Inc. (ASCA) to
buy the latter through an all-cash deal worth $26.50 per share by
third-quarter 2013.
The purchase consideration includes Ameristar Casinos’ total
enterprise value of $2.8 billion including debt of $1.9 billion and
cash on hand of $116 million as of September 30, 2012. The offer
price is at a 45% premium to Ameristar Casinos’ average closing
stock price for the 90 days ended December 20, 2012.
We consider the deal to be strategically positive for both the
parties. For Ameristar, it holds immediate cash value for its
shareholders. The deal will likely benefit this casino gaming
company with the newest and most popular slot machines as its
acquirer also operates in the same vertical.
On the other hand, the acquisition holds significant potential for
Pinnacle Entertainment as well. Ameristar's eight properties are
spread across some of the country’s most compelling geographic
locations like Missouri, Colorado, Mississippi, Indiana, Iowa and
Nevada that makes it a lucrative acquisition target. Hence, the
deal is in sync with Pinnacle Entertainment’s strategy to grow
through geographical diversification.
Ameristar’s assets are expected to be seamlessly integrated with
Pinnacle’s current operational portfolio. The integration will more
than double Pinnacle’s size to 17 operational properties in 13
different geographies. Location-wise, the properties of both the
companies are least likely to overlap.
Pinnacle is confident about deriving significant synergy off the
deal. The acquirer anticipates that this unison will garner scale
advantage of at least $40 million annually, with the amount scaling
up as the integration process moves forward. The acquisition of
Ameristar is expected to be accretive to Pinnacle’s free cash flow
and earnings per share subsequent to the closure of the deal.
Recently,, casino industry operators have been striving hard to
gain market share through sector consolidation. While the step
enhances operational efficiency, it alleviates competitive pressure
as well. In May this year, another casino operator Boyd
Gaming Corporation (BYD) also embarked on a high-budget
acquisition of Peninsula Gaming (worth $1.45 billion). Currently,
Ameristar has a Zacks #3 Rank short-term ‘Hold’ rating.
AMERISTAR CASIN (ASCA): Free Stock Analysis Report
BOYD GAMING CP (BYD): Free Stock Analysis Report
PINNACLE ENTRTN (PNK): Free Stock Analysis Report
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