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Best of Howard Stutz

Gaming Guru

Howard Stutz

Ameristar closes deal for riverboat

20 September 2007

LAS VEGAS, Nevada -- Las Vegas-based Ameristar Casinos officially entered its seventh gaming market, completing a $675 million acquisition of the Resorts East Chicago riverboat casino that is in Indiana, but caters to customers from lucrative Chicago.

The deal closed late Tuesday, five months after it was originally announced. Ameristar, which operates regional casinos in Northern Nevada, Missouri, Iowa, Mississippi and Colorado, plans to rebrand the 53,000-square-foot casino as an Ameristar property.

Ameristar Chief Executive Officer John Boushy said the purchase of the casino from Resorts International was an important step in the company's previously announced strategy of expanding through acquisition.

"The purchase of Resorts East Chicago provides access to one of the nation's most attractive gaming markets, diversifies our cash flow, and greatly enhances our distribution channels," Boushy said in a statement. "As a result, this acquisition represents a significant milestone in achieving our growth objectives."

Ameristar said it would spend between $20 million and $25 million to upgrade the casino, which has 1,900 slot machines, 60 table games and 16 poker tables, and the 291-room hotel. The company will also spend between $5 million and $7 million to integrate the casino's systems into Ameristar's operating structure.

The company has done similar rebranding with its acquired casinos over the years, including properties in Kansas City and St. Charles, Mo.

"Ameristar has established an impressive record of maximizing the value of our acquired properties, and we are confident we will do the same with Resorts East Chicago," Ameristar Executive Vice President Gordon Kanofsky said.

A report by Jefferies & Co., shows the eight casinos in the Chicagoland casino market, which includes Illinois and northern Indiana, produced almost $2.5 billion in gaming revenues in the 12 months ended Dec. 31, making it the third-largest gaming jurisdiction behind Las Vegas and Atlantic City.

The competition for Ameristar includes the Blue Chip casino in Michigan City, Ind., which is operated by Boyd Gaming Corp., and the Horseshoe in Hammond, Ind., which is owned by Harrah's Entertainment. Harrah's also operates a riverboat casino near Joliet, Ill., while MGM Mirage jointly owns the Grand Victoria riverboat casino with the Hyatt Corp. in Elgin, Ill.

All of the casino operations cater to an estimated 6.4 million adults in the Chicago area.

Ameristar said it would explore longer-term expansion at the casino, including a new single-level casino, additional parking, new restaurants and entertainment attractions and better property access throughout the property. The company said the timing, scope and cost of these projects will depend on several factors, including potential changes in competitive conditions in the Chicago market.

Gaming analyst Justin Sebastiano of Nollenberger Capital Partners said the deal made sense for Ameristar to complete, but he added that it may take the company a few years to realize a return on its investment.

"We believe the company paid too much, but we understand its decision," Sebastiano said in a note to investors Wednesday. "Resorts East Chicago is a riverboat that operates in the Chicagoland market where Ameristar currently does not have a presence. Acquisitions like this one should help Ameristar achieve its previously stated goal of doubling its (cash flow) over the next three to five years."

Ameristar moved its general manager of the Ameristar Kansas City property, Timothy Wright, to take over as the general manager of the newly acquired casino.