Pinnacle’s Promise

Due to plummeting revenues, Pinnacle Entertainment has shelved plans to acquire rival Ameristar Casinos.

Pinnacle saw a net loss of USD 18.1 million (30 cents per share) in second quarter 2008, compared with a net income of USD 9.9 million (16 cents a share) in the same quarter of 2007. Analysts had predicted a net loss of 2 cents per share.

To compound the money crunch, the casino operator paid USD 40 million, or USD 32 per share, for 1.25 million shares of Ameristar stock last year (about 2 percent of the company’s outstanding shares). Last week Ameristar stock was trading at around USD 13 per share, meaning a loss of USD 22.6 million in the quarter for Pinnacle.

Pinnacle anticipated that Ameristar would be sold after the 2006 death of company founder Craig Neilsen, but the market bottomed out before the company could make any moves toward a buyout.

“Credit markets have also tightened, making it much more expensive and perhaps impossible to consummate such an acquisition,” said Pinnacle Chairman Dan Lee in a statement last week.

Meantime, there’s good news and bad news about Pinnacle’s planned USD 2 billion Atlantic City hotel-casino. The company still intends to build – and has even disclosed its top-secret design theme – but nothing can happen until choked capital markets improve.

The as-yet unnamed USD 1.5 billion-to-USD 2 billion project on the site of the former Sands Casino along the Atlantic City Boardwalk has been stalled since February. Lee now says the design phase is almost complete, and the company has acquired more than USD 50 million worth of nearby land to expand its development site, bringing its total investment thus far to about USD 360 million.

“We’ve gone into a little bit of a holding pattern,” Lee said, adding the company will “inch toward” expansion in the East Coast gaming capital. The casino, originally slated to open in 2011 or 2012, will have a beach theme.

Lee says Pinnacle also plans to either sell or close the Casino at Emerald Bay in the Bahamas.