Gaming Strategy
Featured Stories
Legal News Financial News Casino Opening and Remodeling News Gaming Industry Executives Search News Subscribe
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Search Our Archive of Gaming Articles 

Argosy, MGM MIRAGE Look at Expansion in Chicago Area

6 April 2001

by David Strow

LAS VEGAS, Nevada – April 6, 2001 --Argosy Gaming Co. is apparently closing in on a pact to buy Jack Binion's riverboat casino in Joliet, Illinois, several knowledgeable sources say.

The Alton, Ill., riverboat company -- one of the few gaming companies in good graces with investors in a shaky market -- would pay between $450 million to $475 million for the Chicago-area casino, owned by Binion-controlled Horseshoe Gaming Inc., according to sources. That's below the $500 million Binion was said to be seeking for the casino when it first went on the market.

Argosy officials could not be reached for comment. However, in an interview with Dow Jones News Service, Argosy Chief Executive James Perry said Chicago presented a strong opportunity for the company, though he declined comment on the possibility Argosy would buy Binion's Empress boat.

Few are surprised at Argosy's interest, as the company's specialty is riverboat casinos and its debt load is relatively modest compared to the rest of the gaming industry. A $450 million buyout of the Empress would push its debt levels to four times annual cash flow, still modest compared to its competitors, said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown.

"Argosy is in a very good position," Zarnett said.

Argosy has riverboats near Cincinnati, St. Louis, Kansas City, Baton Rouge, La., and Sioux City, Iowa, but has no presence in Chicago.

"(The Empress Joliet) is a very dominant riverboat in the Chicago market, one of the best (gaming) markets in the United States for the last five years," said David Anders, gaming analyst with Merrill Lynch.

What is more surprising is that more companies didn't emerge as bidders on the highly successful casino.

Mandalay Resort Group of Las Vegas would have made sense as a bidder, Zarnett said, because of its success with its casino in Elgin, Ill., and its need for further geographic diversification. But Zarnett said he's also hearing now that an Argosy deal is imminent.

A reason for the limited competition, Zarnett said, is that many major companies were instead eyeing the potential opportunity to build a new casino in the Chicago suburb of Rosemont, Ill.

Rosemont, located just west of Chicago on the Des Plaines River, is one of the most attractive potential gaming sites in Chicagoland, with immediate access to freeways and O'Hare International Airport. It is directly in the heart of metropolitan Chicago, while Joliet is on the southwestern outskirts.

"Everybody wants to be in at Rosemont," including MGM MIRAGE and Park Place, Zarnett said. "That was one of the problems in selling this asset (the Empress)."

Binion and Horseshoe agreed to sell the Empress in a January settlement with the Illinois Gaming Board. Citing questionable business practices and compliance issues in Nevada, Louisiana and Illinois, the board found Binion unsuitable to hold an Illinois gaming license last summer. Under the settlement, Binion has until June to unload the property.

The casino is one of the top producing riverboat properties in the country, generating cash flow of $72 million in 2000. Still, the $500 million initial pricetag appears to have caused some major bidders to balk at making a run at the Empress.

Two major Las Vegas companies that never entered the bidding were Harrah's Entertainment Inc. and MGM MIRAGE, though the latter was often mentioned as a potential buyer.

Gary Loveman, chief operating officer of Harrah's, pointed out that Harrah's already has a Joliet casino.

"That's unlikely for us, in terms of anti-trust (law)," Loveman said. "That's one of our primary competitors there."

And riverboats simply don't fit with MGM MIRAGE's culture, Chairman Terry Lanni said.

"Our view is, we'd like to build something more special," Lanni said.

And the opportunity to do that could come in Rosemont, he said.

"If that's ever untangled, it would be of great interest to us," Lanni said. "(But) we'd need to see some level of untanglement before anything happens."

The path of entry would be through the acquisition of a controlling interest in Emerald Casino Inc., which had hoped to build a casino in the Chicago suburb. But no one is sure if Emerald -- or anyone else, for that matter -- will be able to put a casino in Rosemont, following the Illinois Gaming Board's January decision to deny a license to Emerald Chairman Kevin Flynn and his father, Donald Flynn. Emerald had operated a casino in East Dubuque that went under, and was trying to transfer the license to Rosemont with the assistance of Mayor Don Stephens.

The spectre of organized crime hung thick over the denial. Board members alleged that two Emerald shareholders had close organized crime ties and that at least one construction firm that would have done work on the casino was mob-controlled. The board also ripped the Flynns for repeatedly making "false and misleading statements" to the board.

"The investigative record establishes the insidious presence of organized crime elements associated with this proposed project that cannot be ignored," Board Administrator Sergio Acosta said in January following the denial.

The Flynns are now talking with potential buyers of their Emerald stake, a move they hope will allow Emerald's remaining shareholders to receive a Rosemont license. But it isn't certain at all that the board will approve that.

In its written complaint against the Flynns, the board stated that terms of the lease between Emerald and Rosemont "tend to discredit the Illinois gaming industry and /or the state of Illinois," the Chicago Sun-Times reported. The lease gave Stephens the right to select the construction company that would do work on the project.

Moreover, the board said, Stephens received campaign contributions from at least two known mob associates. One of these associates, D&P Construction Inc., later was contracted to do work on the Emerald.

The Sun-Times, quoting an unnamed source, said the report sent "strong signals" that regulators were sour on a casino project in Rosemont.

Still, if the license can be extricated, it would present an attractive opportunity for a Las Vegas operator, particularly MGM MIRAGE, Anders said.

"They'd build a project from the ground up, so they could ensure it's MGM MIRAGE-type quality," Anders said. "If you can get a major project in it (Rosemont), that's pretty attractive."

< Gaming News