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Colony Capital Makes Bid for Gaming Firm Pinnacle

Buyout: The owner of Harveys Casino Resorts offers $675 million for the former owner of Hollywood Park.

March 09, 2000|From Bloomberg News

Pinnacle Entertainment Inc. said Wednesday that it is considering a buyout bid from Colony Capital Inc., which is offering to acquire the casino owner and card club operator for about $675 million in cash.

Los Angeles-based Colony, the closely held owner of Harveys Casino Resorts, would pay $25 a share for Pinnacle, 30% more than its Tuesday closing price. Colony also would assume debt of about $625 million, a Pinnacle spokesman said.

Pinnacle shares rose $1.75, or 9%, to close at $21 on the New York Stock Exchange.

The offer comes as Pinnacle faces limited opportunities to expand, analysts said. The Glendale-based company, which changed its name from Hollywood Park Inc. last week, is building the Belterra Resort & Casino in southern Indiana near Cincinnati. After that, it's unclear where Pinnacle can add new casinos, as regulators in small gambling markets where it operates aren't allowing many new properties, analysts said.

"I think putting the Pinnacle assets together with Harveys makes a lot of sense," Credit Suisse First Boston Inc. analyst David Anders said.

The combined company could cut operating costs by combining management, analysts said. Pinnacle executives also might be able to boost profits at the Harveys casinos, they said.

Pinnacle President Paul Alanis is the former president of closely held Horseshoe Gaming. He and his team, who moved to Pinnacle last year, developed some of the most lucrative riverboat casinos in the U.S. for Horseshoe, analysts said.

Pinnacle owns and operators casinos and hotels in Nevada, Mississippi, Louisiana and Argentina. It also receives lease income from two Los Angeles-area card clubs.

The company has been moving out of the racetrack business, completing the sale of its Hollywood Park Race Track in Inglewood to Churchill Downs Inc. for $140 million in September. It also plans to sell its Turf Paradise racetrack in Arizona.

The company agreed to negotiate exclusively with Colony until the end of this month. It postponed an April 18 shareholders meeting and plans to set a new date in the next few weeks.

Colony's Harveys Casino Resorts unit owns hotels and casinos in Lake Tahoe, Nev.; Council Bluffs, Iowa; and Central City, Colo.

Colony is a private equity firm headed by Thomas Barrack, a former money manager for the Bass family of Texas.

Colony also holds an investment stake in the Savoy hotel chain in Britain.

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