Pinnacle Backs Out of Bid for Aladdin
Pinnacle Entertainment Inc. decided Friday that there was no magic genie to uncork at the Aladdin Resort and Casino, abandoning its efforts to buy the troubled gambling palace on the Las Vegas Strip.
The company wants to focus its capital spending on existing properties and a new $325-million casino in Lake Charles, La., rather than take a plunge into the 2,500-room Aladdin, said Chief Executive Daniel Lee.
Pinnacle had worked with Colony Capital Inc. and Marriott International Inc. to put together a joint $500-million bid for the Aladdin, which features a 17-story Moroccan castle tower, a waterfall and oasis-themed landscaping, said analyst David Bain of Seidler Cos. in Los Angeles.
Pinnacle was prepared to invest an additional $75 million in capital improvements at the Aladdin, but Bain said Aladdin creditors expected more for the property, which cost $1.3 billion to develop.
“It’s smart for Pinnacle to walk away,” he said. “This deal only makes sense at the right price for a small company like Pinnacle.”
Even with Pinnacle bowing out of the Aladdin bidding, Bain said he believed there would be a number of suitors, including major players such as Caesars Palace owner Park Place Entertainment Corp.
The Aladdin opened in August 2000 but struggled from the start.
It filed for protection from creditors in Bankruptcy Court in September 2001.
Pinnacle, former owner of the Hollywood Park racetrack in Inglewood, said Friday that its losses narrowed in the most recent quarter.
Losses shrank to $6.7 million, or 26 cents a share, in the fourth quarter, contrasted with a loss of $22.2 million, or 87 cents, in the same period a year earlier.
Pinnacle, which owns card rooms in Compton and at Hollywood Park, said its financials were helped by improved results at its Belterra Casino Resort in Switzerland County, Ind., and its Boomtown casino in Reno.
Fourth-quarter revenue rose 4% to $125 million from $119.8 million in the same period a year earlier.
Pinnacle shares rose 9 cents to $5.07 on the New York Stock Exchange on Friday.
Analysts said the improved financial results demonstrated that the company was starting to turn the corner after a year of heavy losses.
“We are encouraged by the company’s operating improvement,” wrote William Schmitt, a CIBC World Markets analyst, in a report distributed to investors Friday. “The company remains in a transition period, and we believe further operating improvements are achievable over the next six to 12 months.”
In April, Pinnacle replaced CEO Paul Alanis with Lee, the former chief financial officer of Mirage Resorts Inc., and has since seen a management turnover that included a new CFO, legal counsel and director of marketing and new board members.
For the year, Pinnacle lost $69.6 million, or $2.70 a share, more than double the $28.7 million, or $1.11, in losses the company piled up in 2001. Revenue grew slightly to $514 million, compared with $508 million in 2001.
Formerly based in Glendale, Pinnacle moved its headquarters to Las Vegas in December to be closer to the gaming industry.
Company executives say the new location in America’s gambling capital will help them attract industry executives and employees.
“And even though we don’t have a property there, it allows us to keep our ear to the ground as to what is going on in the gaming industry,” spokesman Sean Collins said.
