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Rod Smith

Boyd Undergoes Growth Spurt

2 July 2004

LAS VEGAS -- When Boyd Gaming Corp. officially completed its $1.3 billion buyout of Coast Casinos on Thursday, the company was firmly focused on growth, with nearly $800 million in expansion projects already under way.

The new company, which includes Coast as a wholly owned subsidiary of Boyd, created the fifth-largest gaming operator in the world. It will become the fourth-largest once MGM Mirage absorbs Mandalay Resort Group.

Boyd Chairman Bill Boyd said the merger marked a new dawn for the company he founded with his father, Sam Boyd, and takes it to an "entirely new level" as a competitor for the locals gaming market.

"As a larger company -- we will have 18 casinos with a 19th under construction -- we think there will be tremendous opportunities for additional development," Boyd said.

In addition, analysts said the merger significantly enhanced the re-energized company's capacity to raise capital, especially for the redevelopment of the Stardust site on the Strip.

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said the combined company will deploy double the cash flow to support expansion projects.

Michael Gaughan, who owned Coast and remains as head of the Coast subsidiary, said the combined company has a host of exciting development projects already on its plate.

And University of Nevada, Las Vegas professor and casino industry expert Bill Thompson said one of the advantages of the merger between the two local icons is that Boyd and Gaughan will do what's good for Las Vegas rather than doing a monthly dance to a Wall Street drummer.

In Las Vegas, Boyd is in the middle of a $40 million expansion at the Orleans on Tropicana Avenue west of Interstate 15. that will add a 450-room hotel tower, bringing the property's total room count to approximately 1,900.

The company has also broken ground for the $400 million Southcoast, a locals-oriented hotel-casino in the high growth area along Las Vegas Boulevard south of McCarran International Airport.

When it opens next year, the 25-story Southcoast will have 662 rooms, 2,400 slots and 60 tables as well as 150,000 square feet of convention, exhibit and banquet space, an equestrian complex, a 16-screen movie theater and a 64-lane bowling center.

Boyd said his company will wrap up plans for the redevelopment of the Stardust site as soon as the opening of Wynn Las Vegas, now set for April 28.

He declined to discuss plans the company is considering, but analysts have said it is likely he will build a megaresort to compete effectively with developer Steve Wynn and other major Strip operators.

Hal Rothman, history department chairman at the University of Nevada, Las Vegas, said economic pressures, including the debut of Wynn Las Vegas and the continuing mergermania in the gaming industry, make the redevelopment of the north end of the Strip around the Stardust inevitable.

Other properties in the area likely to be redeveloped include the New Frontier, the Sahara, the Riviera and Wet 'n Wild water park.

Outside Las Vegas, Boyd has launched a $150 million expansion and renovation of the Blue Chip Casino and Hotel in Michigan City, Ind., which will include a larger multilevel, state-of-the-art riverboat with gaming on one level and an expanded garage with 900 parking spaces.

Analysts said the Michigan City riverboat has been the top Boyd property in cash flow, a key measure of profitability.

Boyd also has a $55 million expansion of Delta Downs Racetrack and Casino under way in Vinton, La., including an expansion of the casino to enhance the ambience and a 200-room hotel tower.

Finally, Boyd and MGM Mirage, its joint venture partner in the Borgata, are committed to a major expansion of the new Atlantic City hotel-casino.

Although both companies said plans have not been completed, Boyd said his intention is to add 750 slots and 26 tables, to expand poker from 34 to 100 tables and the race book from 35 seats to 100, and to open three new casual restaurants and two fine-dining restaurants. Analysts said the expansion is likely to cost more than $150 million.

Despite the importance of Boyd's renewed focus on the red-hot locals market, analysts said the expansion projects suggest the company will maintain its roughly 50-50 balance in revenues from Las Vegas and regional markets.

Boyd closed Thursday at $27.70, up $1.08, or 4 percent, on 2 million shares traded, six times normal volume.