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Howard Stutz

Pinnacle plans to purchase majority stake in Texas racetrack

27 April 2012

Regional casino operator Pinnacle Entertainment, Inc. announced Thursday it will acquire a 75.5 percent interest in a Texas racetrack for $22.8 million.

The Las Vegas-based company, which operates casinos in Louisiana, St. Louis and Indiana, also owns the River Downs Racetrack in Cincinnati, Ohio.

Analysts said Thursday's deal helps buoy Pinnacle if Texas legalizes casino gaming. The facility, Retama Park Racetrack in Selma, is 20 miles from San Antonio and 65 miles from Austin.

"We view Pinnacle's purchase as somewhat indicative that momentum for Texas gaming could be building into the 2013 legislative session," Credit Suisse gaming analyst Joel Simkins told investors. "Having a stake in this property will give Pinnacle a seat at the bargaining table if Texas considers gaming at racetracks and should help to mitigate investor concerns."

Pinnacle Chief Executive Officer Anthony Sanfilippo said the deal, expected to close at the end of the year, helps diversify the company's operations.

"Retama Park provides significant strategic value for our shareholders given the potential approval of gaming entertainment centers at Texas pari-mutuel facilities," Sanfilippo said.

The Texas transaction also serves as an insurance policy for Pinnacle's Louisiana casinos, including the L'Auberge du Lac resort in Lake Charles, which draws the bulk of its customers from the Houston area, and the Boomtown Bossier City, which draws patrons from the Dallas market.

"We see this as an important hedge for Pinnacle," Simkins said.

In 2010, Pinnacle spent $45 million for the Ohio racetrack to position itself for a change in state law to allow seven racetracks to add casinos with video lottery terminals.

Analysts said the River Downs deal helped protect the company Belterra casino in neighboring Indiana while providing a new growth market through the casino expansion.