MGM to sell casinos in border town
A new dealer is headed for Primm, the California-Nevada border town that for years has offered fortune hunters the first crack at a jackpot and the last chance to win it all back.
Las Vegas-based MGM Mirage said Wednesday that it would sell Primm’s trio of casinos for $400 million to Herbst Gaming Inc., a fast-growing Las Vegas company known for its roadside slot machines and its Terrible’s gas stations and casinos.
The sale includes 2,644 rooms and 136,000 square feet of casino space at the Buffalo Bill’s, Primm Valley and Whiskey Pete’s hotel-casinos. The deal doesn’t include the 537-acre Primm Valley Golf Club.
“These are wonderful assets, and in the hands of great operators like Herbst they’re going to continue to be great assets,” said MGM Mirage spokesman Alan Feldman. “But our company’s focus is really on our core strategic properties in Las Vegas, Mississippi and, in the future, New Jersey, as well as in our Asian expansion in Macao.”
The world’s second-largest casino operator has embarked on the $7-billion, 66-acre Project CityCenter in Las Vegas, a mix of casinos, boutique hotels, condominiums and retail stores -- the most expensive and largest project in the city’s history. It also has a 50% interest in the MGM Grand Macau, which is scheduled to open late next year.
Analysts deemed the sale a good deal for MGM Mirage, which said it expected to report a substantial gain on the properties it bought in 1999.
“It makes sense that they would sell it,” said John Restrepo of Restrepo Consulting Group, a Las Vegas gaming, real estate and economic consulting firm.
“They’re taking their product to a whole new level -- high-end, full-service resorts and mixed-use entertainment resorts,” he said. “The properties out there did not meet that criterion.”
The Primm casinos, on a lonely stretch of Interstate 15 about 40 miles from Vegas, are more of a pit stop than a destination for about 40,000 people who drive by each day. Still, they drew about $35 million to $40 million in annual operating earnings for MGM Mirage, said CIBC World Markets analyst David Katz.
“I don’t know that they really and truly capture any leverage off of the Primm Valley market for their Las Vegas Strip business, exposure to Atlantic City or any other markets where they play,” Katz said, referring to MGM Mirage.
For Herbst Gaming, the deal marks the largest in a string of recent purchases. The company owns eight casinos in Nevada, Missouri and Iowa and 8,400 slot machines in convenience stores, gas stations and bars.
The Primm properties will be “one of their crown jewels,” Restrepo said.
Herbst Gaming was founded in 1959, largely as a chain of gas stations with a “Bad Guy” logo, then expanded into gambling in 1987. Company officials declined to comment Wednesday, but President Edward Herbst said in a statement that the casinos would fit well with the other properties and that “the Terrible’s brand will bring added excitement to the I-15 corridor.”
Herbst Gaming has been on an aggressive acquisition path. In May, the company agreed to buy the Sands Regent in Reno for $148 million. Last year it acquired three casinos in Missouri and Iowa. Privately held Herbst, which has public debt, reported 2005 net income of $50.8 million on revenue of $557.5 million.
Financing details weren’t available Wednesday, but Standard & Poor’s Rating Services placed Herbst on a negative credit watch because of the probability of increased debt.
Herbst approached MGM Mirage about the Primm properties, Feldman said. Although no other properties are for sale, he said, “if buyers present themselves -- and they do from time to time -- we’ll certainly enter into a discussion with them.”
In addition to Las Vegas, MGM Mirage owns casinos in Reno, Laughlin and Jean, Nev., as well as in Illinois, Michigan, New Jersey and Mississippi.
MGM shares fell 21 cents Wednesday to $42.81.
