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Best of Howard Stutz

Gaming Guru

Howard Stutz

Pinnacle seeking addition in Gulf

1 November 2006

LOUISIANA -- Las Vegas-based Pinnacle Entertainment wants to compete in another Louisiana gambling market and has submitted an application to state gaming regulators to move a shuttered Lake Charles riverboat casino to a new location in Baton Rouge.

If successful, Pinnacle would operate casinos in all four of the state's jurisdictions that allow riverboat gambling.

In a filing with the Louisiana Gaming Control Board last week, Pinnacle said it wanted to move one of two riverboat casino licenses the company acquired in a trade with Harrah's Entertainment to a 35-acre site in Baton Rouge, Louisiana's state capital.

The area's population has increased in the past year due as displaced New Orleans residents moved north after their homes and businesses were destroyed in the aftermath of Hurricane Katrina in August 2005.

There are only two casinos in Baton Rouge, operated by Columbia Sussex Corp. and Penn National Gaming. Through September, casino revenue in the market was up 26 percent over 2005.

Pinnacle Entertainment spokeswoman Pauline Yoshihashi said Tuesday the company needs to discuss the matter with Louisiana casino regulators before commenting on its plans for the location. In its filing Pinnacle did not reveal much about the proposed casino.

Pinnacle will also need to have the casino approved by Baton Rouge citizens in a special election.

Gaming analysts were not surprised by the filing. Pinnacle bought the Baton Rouge site in September for $1.1 million.

"Pinnacle has indicated that Baton Rouge is experiencing an influx of population of residents displaced from New Orleans and could be an attractive site for a new casino resort," Deutsche Bank gaming analyst Bill Lerner said in a note to investors. "However, we anticipate considerable opposition from the two existing operators, Penn National and Columbia Sussex, who commissioned a study concluding that Baton Rouge is a 'two boat' market, attracting few out of state gamers."

Bear Stearns gaming analyst Joe Greff agreed that Penn National and Columbia Sussex would probably fight Pinnacle's entry into the Baton Rouge market.

"Both (have) complained about the viability of three casinos in the market," Greff said in a note to investors. "We would expect Pinnacle's offering to be the best in the market."

Pinnacle announced in July that one of the two licenses it acquired from Harrah's would be used to build a second riverboat casino in Lake Charles, the $350 million Sugarcane Bay near the company's L'Auberge du Lac casino.

Earlier this year, Pinnacle swapped Harrah's its hurricane-damaged casino site in Biloxi, Miss., and $25 million, for the company's two Lake Charles riverboat licenses. Both the casinos were destroyed by Hurricane Rita in September 2005.

Voters in Lake Charles are being asked to approve the casino in next week's election.

Pinnacle also operates Boomtown in Bossier City, near Shreveport and Boomtown New Orleans, in the suburb of Harvey.

Pinnacle shares fell 40 cents, or 1.3 percent, Tuesday to close at $30.26 on the New York Stock Exchange.