ANGELES - The merger-happy casino industry is getting
thin on takeover targets, but the buyout announced this
week for Kerzner International Ltd. shows deal-making
can continue at the right price, industry experts said.
is hard to see what will be the next target, but given
the high amounts of capital interested in these types
of assets, other transactions could follow," Goldman
Sachs analyst Steven Kent said in a research note.
led by Kerzner Chairman Sol Kerzner and his son, Butch,
the company's chief executive, offered to pay about $3
billion to take the Bahamas-based company private.
deal follows news last week that Aztar Corp., owner of
Tropicana casinos in Las Vegas and Atlantic City, agreed
to be acquired by riverboat gambling operator Pinnacle
Entertainment Inc. for about $1.45 billion.
takeover candidates include Ameristar Casinos Inc. and
riverboat and dockside casino company Isle of Capri Casinos
Inc., but both are majority-owned by insiders. said Jefferies
& Co. analyst Larry Klatzkin.
a family decides to sell, the deal can be done quickly.
But if they don't want to sell, a deal won't get done,"
popularity has skyrocketed in recent years along with
the value of the underlying real estate, but because so
many regulations limit where casino operators can expand,
acquisitions have been a key growth engine.
obvious companies out there are gone ... Argosy and Aztar
were always the two freighted to go someday," Klatzkin
said, referring to riverboat casino operator Argosy Gaming
Co., which was acquired in October by casino and racetrack
operator Penn National Gaming Inc. for about $1.4 billion.
year's other high-stakes deals were Harrah's Entertainment
Inc.'s $6.8 billion acquisition of Caesars Entertainment
and the $5 billion buyout by MGM Mirage of Mandalay Resort
said the Kerzner buyout, at 16.6 times estimated 2006
earnings, represents a clear premium to recent acquisitions
in the gaming space which have had earnings multiples
ranging from 7 to 10, with Aztar going for a multiple
buyers may be willing to pay more than public companies
because of favorable financing terms and stock multiples
that, in some cases, underestimate the true value of underlying
real estate, Deutsche Bank analyst Marc Falcone said in
also cite the January announcement that a Saudi prince
and Colony Capital will pay $3.9 billion to buy luxury
hotel operator Fairmont Hotels & Resorts Inc. as further
evidence that consolidation and perceptions of high asset
value remain themes in the gaming and lodging sector.
and Fairmont "demonstrate the healthy appetite for
international leisure real estate assets," Kent said.
Kerzner investor group also opened up a 45-day window
to solicit competing bids.
Stearns analyst Joe Greff said a competing bidder -- most
likely private equity or an international resort operator
-- is possible, but they would have to convince the Kerzner
family to stay on. "This would be challenging and
complicated," he said in a report.
big casino operators are also controlled by insiders:
MGM is majority owned by Kirk Kerkorian's Tracinda Corp.,
while Las Vegas Sands Corp., operator of the Venetian
resort in Las Vegas, is controlled by chairman Sheldon
and executives at Wynn Resorts LLC, including Chairman
and CEO Steve Wynn, own 52 percent of the company. Wynn
had previously founded Mirage Resorts, which was acquired
by MGM in 2000.
wasn't a seller, but everything is for sale at a price
... dramatic changes can happen," Klatzkin said.
tightly controlled casino companies include Boyd Gaming
Inc., in which insiders, including Chairman and CEO William
Boyd, own some 52 percent of outstanding shares.
Trump holds a 30-percent stake in Trump Entertainment
Resorts Inc., following the company's emergence from bankruptcy
Penn National and Station Casinos Inc., insiders own less
than 20 percent of outstanding shares, while management
insiders at Harrah's own 4.1 percent of shares.