More Interest in Tropicana Owner: Columbia Sussex Bids for Aztar

KENTUCKY AND PHOENIX -- The monthlong courtship of Aztar Corp. has gained a fourth suitor.

Kentucky-based Columbia Sussex Corp., which operates four Nevada casinos, on Monday bid $2.47 billion for the Phoenix-based owner of the Tropicana, trumping the offers of three other casino companies: Pinnacle Entertainment, Colony Capital and Ameristar Casinos.

The unsolicited bid, $47 a share plus the assumption of debt, was $4 per share higher than any previous offer. Before the Columbia Sussex bid, Aztar said Monday that Las Vegas-based Ameristar upped its price per share offer to $43 from $42. Colony Capital reportedly has offered $41 a share, while Pinnacle announced a month ago it had a signed an agreement to purchase Aztar for $38 a share.

"Nobody saw this coming, and this offer certainly marks a crescendo for Aztar's stock," CRT Capital Group gaming analyst Steve Ruggiero said. "I guess no one is going to complain about the stock being fully valued. We still have to see how they fund (the transaction) and Columbia Sussex hasn't really ever operated any major assets."

In a statement, Aztar officials said the proposal "is, or is reasonably likely to result in, a superior proposal, as defined in Aztar's merger agreement ... with Pinnacle." Company representatives plan to explore the offer with Columbia Sussex officials. Aztar had agreed to discuss the proposals submitted by Colony Capital and Ameristar with those companies.

A Pinnacle spokeswoman said the company had no comment on the Columbia Sussex bid. According to the companies' merger agreement, if their deal falls through, Aztar would have to pay Pinnacle a breakup fee of $42 million and cover up to $13 million of the company's expenses.

Neither Colony Capital nor Ameristar would comment on Monday's events.

After a lack of attention over the past few years, Aztar has become viewed as a valuable acquisition target because it operates casinos in the major gaming capitals, Las Vegas and Atlantic City, as well as smaller properties in Laughlin, Missouri and Indiana.

The Tropicana sits on 34 acres of Strip real estate and most analysts believe a buyer would eventually close and implode the hotel-casino.

Companies such as Pinnacle and Ameristar, which don't operate casinos in Las Vegas or Atlantic City, would acquire a competitive foothold in both markets by buying Aztar.

Gaming analysts speculated Monday that either Columbia Sussex or Colony Capital, operator of the Las Vegas Hilton, would eventually win the bidding war for Aztar because they are private entities and aren't subject to the disclosure rules governing publicly traded companies.

"As we noted previously, we expect the transaction could make sense for both Pinnacle and Ameristar, but that investors could also reward a disciplined decision on valuation," Deutsche Bank gaming analyst Marc Falcone said in a note to investors.

"As private equity players, Columbia Sussex and Colony Capital have an advantage over the public bidders due to greater financial flexibility and the use of leverage, in our opinion, evident from this latest bid from Columbia Sussex."

A spokesman for Columbia Sussex could not be reached for comment.

Shares in Aztar, which were trading in the low $30 price range in early March, soared once again Monday on the New York Stock Exchange. Aztar closed at $46.35, up $1.55 or 3.46 percent. Almost 2.6 million shares were traded.

In Nevada, Columbia Sussex operates The Westin, formerly the Maxim, which the company remodeled in 2004. The company also owns the River Palms in Laughlin. Lake Tahoe is where Columbia Sussex has its largest casino holdings, the Horizon Casino and Caesars Tahoe, which the company purchased last year for $45 million and is being renamed Montbleu.

Columbia Sussex, which operates 80 hotels in 28 states, also has casinos in Mississippi and Louisiana, including the now-closed Belle of Orleans in New Orleans, which was destroyed last year by Hurricane Katrina.

In an interview in June when the company was licensed by Nevada gaming regulators following the purchase of Caesars Tahoe, Columbia Sussex President William Yung said many hotel-casino property functions are handled from the company's corporate offices in Kentucky.

Last year, Columbia Sussex withdrew an application for a Missouri gaming license when it had a contentious go-round with state casino regulators. The company had agreed to purchase the President Casino in St. Louis for $57 million but backed out of the deal because it believed efforts to obtain a Missouri gaming license would be unproductive. Pinnacle Entertainment eventually agreed to buy the riverboat casino.

"We question the proposal to acquire Aztar's Caruthersville, Mo., riverboat in light of the President St. Louis history," Morgan Joseph gaming analyst Adam Steinberg said.