Crescent to Pay $1.7 Billion for Station Casinos
Crescent Real Estate Equities Inc. has agreed to buy Station Casinos Inc. for $1.7 billion in securities and assumed debt, marking billionaire investor Richard Rainwater’s first move into the gaming market.
The transaction values Las Vegas-based Station at a lofty $18 a share, a 58% premium to yesterday’s closing price of $11.38. On Friday, Station shares jumped $4.13, to close at $15.50. Crescent fell 13 cents to close at $37. Both trade on the New York Stock Exchange.
The move is part of a strategy by Rainwater, chairman of Crescent, to use the real estate investment trust to make big bets on markets and businesses he thinks are poised to benefit from long-term population growth and economic trends.
“We view this company’s concentrated investment in the Las Vegas local market as an opportunistic play,” said Gerald Haddock, president and chief executive of Fort Worth-based Crescent. “[We’re] buying in front of significant population migration patterns.”
Las Vegas was the fastest growing metropolitan area in the country between 1990 and 1996, increasing 41% in population, according to reports from the Census Bureau.
Still, at nine times operating cash flow--or earnings before interest, taxes, depreciation and amortization--Crescent is paying 50% more than the value of similar gaming companies to move into this market, said Bear, Stearns Cos. gaming analyst Jason Ader.
Unlike big, glitzy casinos like the Mirage, Caesars Palace and MGM Grand, which attract millions of tourists a year, Station’s no-frills properties cater to the local population.
It owns and operates the Palace Station Hotel & Casino, the Boulder Station Hotel & Casino and Texas Station Gambling Hall & Hotel, all in Las Vegas, as well as the Sunset Station Hotel and Casino in Henderson, Nev. It also has gambling facilities in Missouri.
The bid raised questions among some analysts who said it appears Rainwater is paying a hefty price to expand in a market that is struggling to absorb a flood of new hotel development, with more on the way.
