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LAS VEGAS, Nevada -- An effort by Pinnacle Entertainment to acquire rival Ameristar Casinos collapsed when the share prices for the two Las Vegas-based regional casino operators fell by roughly 60 percent since last fall.
Pinnacle revealed its now discarded plans Wednesday in the company's second-quarter earnings statement.
The company said it had a net loss of $18.1 million, or 30 cents a share, in the period that ended June 30, compared with a net income of $9.9 million, or 16 cents a share, in the same quarter of 2007. Analysts surveyed by Thomson Financial had predicted a net loss of 2 cents per share.
Pinnacle also told investors the company was still moving forward with the approval process to build a $2 billion hotel-casino in Atlantic City but won't take any additional steps until the credit markets come back.
"We can't finance this thing today," Pinnacle Chairman and Chief Executive Officer Dan Lee told analysts during a conference call. "I don't think anybody can. We've gone into a little bit of a holding pattern. We will inch toward having a project that can be built when the capital markets improve."
Lee revealed the company had eyes on acquiring Ameristar. Last October, Pinnacle bought 1.25 million shares of Ameristar, roughly 2 percent of the company's outstanding shares, for $40 million, paying an average price of $32 a share.
Pinnacle management concluded that Ameristar would eventually be sold following the November 2006 death of company founder Craig Neilsen. His shares, a controlling 55 percent of Ameristar, became property of his foundation, which is focused on spinal cord injury research.
However, before Pinnacle could begin any discussions about a buyout, the stock market collapsed. On Wednesday, shares of Ameristar closed at $13.74 on the Nasdaq National Market, up 49 cents, or 3.7 percent.
"Credit markets have also tightened, making it much more expensive and perhaps impossible to consummate such an acquisition," the company said in a release.
Pinnacle took a charge of $22.6 million in the quarter for securities losses based on the decreased Ameristar stock value. The company said the loss should not imply that it was going to sell the shares.
During the quarter, Pinnacle said it had revenues of $266.5 million, compared with $232.9 million a year ago, which didn't include Lumiere Place, the company's St. Louis casino that opened last December. Lumiere Place had revenues of $49.2 million in the quarter.
"Pinnacle is clearly facing some significant challenges in a majority of its markets, whether from increased competition, weak consumer spending or new supply," Macquarie Capital Markets gaming analyst Joel Simkins said in a note to investors. "We do not expect a material improvement in property level fundamentals in the second half of 2008."
Shares of Pinnacle closed at $12.20 on the New York Stock Exchange on Wednesday, up 12 cents, or 0.99 percent.
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