St. Louis’s six-casino market could experience significant changes as Wyomissing, Pennsylvania-based Penn National Gaming, owners of the Hollywood Casino in Maryland Heights and Casino Argosy Alton, Illinois, considers acquiring Las Vegas-based Pinnacle Entertainment, owners of Ameristar Casino in St. Charles and River City Casino in Lemay. In identical statements, the two companies said, “These discussions may or may not lead to any transaction and the company does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.” A combined company would have more than $5 billion in revenue.
Overall, Pinnacle owns and operates 16 gaming properties and Penn has 29. In the St. Louis area, Ameristar St. Charles is the largest casino, based on receipts. It’s located about one mile from Hollywood Casino.
The cash-and-stock deal would require approval from both companies’ boards of directors and shareholders. State and federal regulators also would have to allow the transaction, but potentially could require the new consolidated company to sell off some casino properties in St. Louis and elsewhere for the sake of market competition.
The Missouri Gaming Commission may determine a license transfer “would have no material negative competitive impact.” The Illinois Gaming Board must consider “the impact of any economic concentration” of ownership or control, according to state regulations. And federal regulators have a precedent regarding preserving local market competition: In 2013 Federal Trade Commission antitrust regulators ordered Pinnacle to sell either Lumière in downtown St. Louis or River City when Pinnacle announced its $2.8 billion deal to acquire Ameristar Casinos. Pinnacle ended up selling Lumière to Carl Icahn’s Tropicana Entertainment.
Penn National bought the Alton Argosy, the oldest casino in the St. Louis area, in 2005. The company acquired what was then Harrah’s casino in Maryland Heights from Caesars Entertainment in 2012.
Other jurisdictions that might be impacted include southern Indiana, where Penn owns the Hollywood Casino in Lawrenceburg and Pinnacle owns Belterra just up the road near Vevay. In Baton Rouge, Louisiana, Penn owns the Hollywood casino and Pinnacle owns the L’Auberge Baton Rouge.
In Pinnacle’s second-quarter investor call, President and Chief Financial Officer Carlos Ruisanchez said the company was “actively evaluating businesses. We believe we’re well positioned to add to our portfolio.” In a third-quarter conference call, Penn National Chairman and Chief Executive Officer Anthony Sanfilippo said, “We think we are in a good position if we see opportunities to grow our portfolio.”
Analyst Daniel Holmes, national gaming practice leader for RubinBrown LLP, noted besides owning three of the four casinos in the Missouri portion of metro St. Louis, the consolidated company also would have two casinos on the Missouri side of metro Kansas City, totaling five of 13 casinos statewide. “Many would speculate that the state commission would have a concern of having so many casinos owned by the same operator,” Holmes said. He added that could possibly affect the “future viability” of gaming in the state.
However, Holmes said he didn’t believe the Pinnacle-Penn National consolidation could lead to any Missouri casinos closing. “St. Louis and Kansas City still have a strong business climate for the existing casinos. It’s not getting to the point where it’s oversaturated,” he stated.
Holmes noted consolidation already has been a significant trend in the gaming industry, resulting in economies of scale and reduced administrative and overhead costs.
