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Howard Stutz

Leaders: Carrying on a legacy

2 January 2007

John Boushy joined Ameristar Casinos in August with the idea of learning a new side of the casino industry.

Twenty-seven years in senior executive positions with Harrah's Entertainment showed Boushy gaming from a giant company's perspective. Ameristar would teach him the industry from the view of a smaller, regional player.

With Harrah's, Boushy led several marketing and information technology efforts, including the development of the company's first customer loyalty program. With Ameristar, Boushy was to oversee several corporate functions and participate in the company's casino development, primarily in Midwestern and southern markets.

The sudden death of Ameristar Casinos founder, chairman and majority stockholder Craig Neilsen on Nov. 19, however, changed Boushy's role.

Boushy, who was already Ameristar's president, became the company's chief executive officer. On Dec. 15, Boushy was elected to Ameristar's board of directors.

His initial goal was to assure Wall Street investors and Ameristar employees that the company would press forward, even as gaming analysts speculated the company would become a takeover target.

"Craig was very clear on how he wanted his estate handled," said Boushy during an interview at Ameristar's corporate offices in Las Vegas. "A lot of speculation came up immediately, which, unfortunately happens with the financial markets. But from a management standpoint, the greatest potential for Ameristar and its shareholders is for the current team to continue ahead with the goals of growing the company forcefully."

Not only did Boushy say the company wasn't soliciting takeover bids, he also said he expects Ameristar to double in size in the next few years. He said the company may even acquire a smaller rival or buy casinos operated by some of the larger gaming companies.

"That is our goal for Ameristar," Boushy said. "We intend to pursue the acquisition of properties or companies as long as they are consistent with the criteria that we have followed in the past. It has to be accretive to earnings and we want to be in areas where we can be the best property in the market."

Boushy's challenge is that Ameristar is so synonymous with Neilsen.

Neilsen, a Twin Falls, Idaho, attorney and contractor, owned two small casinos in Jackpot when he was left a quadriplegic by an automobile accident in 1985. Neilsen, operating largely from the bedroom of his Las Vegas home, built Ameristar into a publicly traded, regional gaming pioneer with seven casinos in Northern Nevada, Missouri, Mississippi, Iowa and Colorado.

In 2005, Ameristar earned $66.3 million on revenue of $961.3 million.

The prospect of working closely with Neilsen to build upon Ameristar's current base was enough to entice Boushy away from Harrah's. Boushy had been overseeing the integration of the Caesars Entertainment properties into the Harrah's network following the company's $9 billion buyout when Neilsen came calling.

He was saddened that their time together was brief.

"I had several conversations with Craig after we first spoke in 2004," Boushy said. "As we got to know each other, I realized his philosophy on customer service and how to build loyalty were very close to my own personal beliefs. Craig created an environment where the entire team contributes and I think a company benefits from that."

Ameristar is proceeding with $557 million in growth initiatives at three of the company's casinos; $90 million for an expansion at Ameristar Vicksburg in Mississippi, $209 million for a hotel tower at the Ameristar Black Hawk outside of Denver, and $258 million for a hotel and other amenities at Ameristar St. Charles near St. Louis.

What will follow after the expansion projects finish is highly speculative, Boushy said.

Perhaps, the company could be a buyer. Earlier this year, Ameristar briefly entered the bidding war for Aztar Corp. In addition, Neilsen had said on quarterly conference calls with analysts Ameristar was looking at emerging American gaming opportunities.

Some gaming analysts believe Ameristar could be a buyer if Harrah's were to shed some of its casino holdings over the next year as the company goes through its $27.8 billion buyout by two private equity groups.

Other observers speculate the company could be a seller. They say that despite Boushy's claims, Ameristar may be on the auction block.

Before he died, Neilsen had established that his 31.1 million shares of Ameristar, roughly 56 percent of the company, be transferred to his private foundation which is focused on spinal-cord-injury research and treatment.

Morgan Joseph gaming analyst Adam Steinberg believes the tax implications for the foundation are too great for Ameristar not to be sold. According to an Internal Revenue Service code, Steinberg said the foundation is limited to 20 percent voting stock of any business enterprise. A private foundation with excess business holdings could become liable for any taxes.

"We do not believe it is possible for the foundation to retain this controlling interest because of tax consequences," Steinberg said in a Dec. 14 note to investors. "The Foundation is well within its rights to maintain its interest in Ameristar and pay the taxes or to sell enough holdings to drop below the 20 percent threshold."

Steinberg said the foundation stands to gain the most from a sale of Ameristar. Neilsen's holdings are valued at close to $1 billion, based on recent closing prices of Ameristar's stock on the Nasdaq National Market.

"To honor Mr. Neilsen and respect his wishes, we do not believe the company is actively shopping itself," Steinberg said. "However, we believe the trustees of the foundation have a duty to review and respond to unsolicited offers for Ameristar."

Boushy said the foundation has five years to decrease the amount of shares to 20 percent. However, Neilsen's holdings are tied up in probate, which could take two to three years to navigate. Ray Neilsen, Craig Neilsen's son, and longtime Ameristar executive Gordon Kanofsky were named co-chairmen of Ameristar and are also the executors of Neilsen's estate.

"There has been a lot of speculation about acquisition, but Craig put the structure in place for us to grow the company like he had hoped," Boushy said.