Even within the epic history of Las Vegas binges, the purchasing spree undertaken by “locals” casinos has been noteworthy.
Let’s consider the timeline:
■ On April 21, it is reported that Boyd Gaming will pay $380 million to buy the Aliante in North Las Vegas.
■ On April 25, Boyd Gaming announced a $230 million deal to acquire Cannery Casino Resorts LLC and its two casinos – the Cannery in North Las Vegas and the Eastside Cannery on Boulder Highway.
■ On April 27, RRR debuted on Wall Street. The brand formerly known as Station Casinos sold 27.25 million shares that day, netting $531 million. But the price quickly slipped below $19 from its $19.50 IPO. Short sales topped 7.5 million shares.
■ After the market closed May 10, RRR announced a deal to buy the Palms for $312.5 million. The deal is expected to close in the third quarter. The Palms has 710 rooms in two towers not far off the Strip on Flamingo.
An arms race in the locals casino market may seem an oxymoron, but that appears to be what we have here.
Times are good by any measure except a straight-up comparison to the pre-recession boom days. Sellers sensed the top of the market; buyers see room to grow; time will tell who got the better deal.
What’s not debatable is that the consolidation of the market has now reached alarming levels. No, we’re not suggesting the feds should jump in and protect the consumer. Boyd and Red Rock are small fish with a combined market cap that’s barely a quarter of MGM, for example. It’s more a concern about the loss of independent thought, of potential for innovation and new concepts.
On the flip side, the marketplace will be getting a new look inside the workings of Red Rock Resorts as the company starts to file all that paperwork the Securities and Exchange Commission requires. We can follow the ups and down of the $1.34 billion revenue stream and its 9.46 percent profit margin. We can keep an eye on Frank Fertitta’s pay and the value of his holdings.
Boyd Gaming is larger today, but its 2.15 profit margin suggests something is amiss. Yet the value of the stock isn’t that far from its yearly peak.
Watching a game of Monopoly, played with real hotels, can be almost as much fun as playing. And it’s a lot less risky.