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Another Offer for Aztar

A bidding war for the casino operator's Vegas property is heating up.

April 18, 2006|From Reuters

Casino operator Aztar Corp. said Monday that it received a buyout offer valued at $1.69 billion from closely held hotel owner Columbia Sussex Corp. and would begin negotiations, heating up a bidding war already involving three other suitors.

Phoenix-based Aztar, which owns a desirable parcel of land on the Las Vegas Strip occupied by its Tropicana casino and a casino in Atlantic City, has attracted suitors looking to establish a presence in the two largest U.S. gambling markets.

Analysts said the bidders were paying for the 34 acres of Aztar's land on the Las Vegas Strip, but Columbia's offer at $47 a share -- a 4.9% premium over Aztar's close on Thursday -- has pushed the price too high.

On Monday, Aztar stock jumped $1.55 to $46.35.

The latest offer by Columbia Sussex's gaming affiliate, Columbia Entertainment, would value the Las Vegas land at $20 million to $23 million per acre, Deutsche Bank analyst Marc Falcone wrote in a research note.

"This would be the highest value paid for such a large site in Las Vegas," Falcone wrote. "We would expect that it could be difficult to generate sufficient returns on a project where the land cost is starting" at $675 million to $775 million.

Columbia's bid was $48.50, including a $55-million break-up fee from Aztar's agreement with Pinnacle, Falcone said.

One analyst said he expected the bidding war to cool. "It seems that the valuation is getting to the point where I wouldn't really expect a substantially higher competing bid," said Smedes Rose, an analyst at Calyon Securities.

Columbia Entertainment's unsolicited offer for Aztar on April 13 came on the heels of bids by rivals Pinnacle Entertainment Inc. and Ameristar Casinos Inc. as well as investment firm Colony Capital Acquisitions.

Aztar said its board has not recommended any of the offers.

Ameristar and Pinnacle refused to comment. Colony could not be reached for comment.

Fort Mitchell, Ky.-based Columbia Sussex already owns casinos in Louisiana, Missouri and Nevada, including the Westin in Las Vegas.

It also owns 83 hotels, including Marriotts, Wyndhams and Holiday Inns.

Aztar said it received a definitive proposal April 14 from Ameristar, increasing its bid to $43 a share from $42 offered earlier this month.

Colony Capital has offered to buy Aztar for $41 a share.

Aztar, which initially had agreed to be bought by Pinnacle for $38 a share, or about $1.45 billion, said its board has determined that Columbia's offer appeared to be better than Pinnacle's.

For companies such as Pinnacle and Ameristar, Aztar has the added lure of having a presence in Las Vegas and Atlantic City, which would help them take on larger operators such as Harrah's Entertainment Inc. that can offer discounts at its casinos in the two gaming meccas to reward loyal customers elsewhere.

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