Pinnacle Shares Fall 28% in Wake of Delayed Harveys Buy

Pinnacle Entertainment Inc. shares fell 28% after the company said Thursday that its $1.28-billion sale to rival gaming company Harveys Casino Resorts is being delayed because of turmoil in the debt markets.

Pinnacle shares fell $6.06 to close at $15.31 on the New York Stock Exchange, after trading as low as $14.25.

The companies, in separate statements released by PRNewswire, said the purchase isn’t terminated, though there can be no assurance a transaction will be completed.

Harveys on Thursday postponed plans to sell $675 million of high-yield securities that were to help finance the acquisition of Glendale-based Pinnacle Entertainment. In recent weeks investors have demanded higher yields on corporate debt amid rising corporate defaults and concerns about a slowing economy. Harveys is controlled by private Los Angeles-based equity firm Colony Capital Inc.

“The only reason [for the delay] is that Colony had some concerns about the high-yield arena,” said Kathy Brunson, a spokeswoman for Pinnacle. “The deal will go through.”

Dennis Forst, an analyst at McDonald Investments Inc., said the companies might be waiting to see if the Federal Reserve lowers interest rates by the end of March, as some are expecting.

“Rates have gone up dramatically since when they announced the deal,” Forst said. “It probably got to the point where it didn’t make sense. There’s a lot of reasons it should go on.”

Harveys first agreed to buy Pinnacle for $24 a share plus the assumption of about $650 million in debt in April. The purchase would combine Pinnacle’s Boomtown and Casino Magic chains in Mississippi, Louisiana, Nevada and Argentina with the Harveys casinos in Lake Tahoe, Nev.; Council Bluffs, Iowa; and Central City, Colo.