Boyd's Decision not to purchase all of Borgata in AC
November 15th, 2010 at 1:11:33 AM
permalink
As most of you know MGM Resorts decided to sell their half of the Borgata resort in AC rather than argue with the NJ gaming commission about their dealings with Patsy Ho. They sold their half to Leonard Green & Partners, a buyout firm that manages about $9 billion MGM Resorts said this month it received an offer for its 50 percent Borgata stake that will generate proceeds of about $250 million.
Harrah's and Borgata which are the two AC casinos that are not in town or on the boardwalk have seen their gaming revenue drop a lot less than the other resorts.
Yearly percentage drop from 2006 to 2009 (gaming revenue only).
Harrah's | -1.4%
Borgata | -2.0%
Trump Taj Mahal | -5.5%
Caesars | -6.1%
Showboat | -9.7%
Bally's AC | -11.2%
Tropicana | -11.9%
Resorts | -12.2%
Trump Plaza | -12.4%
Trump Marina | -14.2%
AC Hilton | -16.5%
-----
ATLANTIC CITY | -8.0%
For the first half of 2010, unlike Vegas, gaming revenue still continues to drop at 7.68%. Borgata at 7.11%.
Borgata brings in almost $700 million in gaming revenue a year, and it is the only resort with a substantial non-gaming revenue. Most of the other AC resorts don't make any money on non-gaming revenue.
I am surprised that Boyd passed on the opportunity to buy the entire resort. They he the right of first refusal.
Theories are that AC is so anathema at Wall Street that any investment there would hurt Boyd's stock. Another theory is that they are also being prepared to be taken over by another party, and that is occupying their time.
Harrah's and Borgata which are the two AC casinos that are not in town or on the boardwalk have seen their gaming revenue drop a lot less than the other resorts.
Yearly percentage drop from 2006 to 2009 (gaming revenue only).
Harrah's | -1.4%
Borgata | -2.0%
Trump Taj Mahal | -5.5%
Caesars | -6.1%
Showboat | -9.7%
Bally's AC | -11.2%
Tropicana | -11.9%
Resorts | -12.2%
Trump Plaza | -12.4%
Trump Marina | -14.2%
AC Hilton | -16.5%
-----
ATLANTIC CITY | -8.0%
For the first half of 2010, unlike Vegas, gaming revenue still continues to drop at 7.68%. Borgata at 7.11%.
Borgata brings in almost $700 million in gaming revenue a year, and it is the only resort with a substantial non-gaming revenue. Most of the other AC resorts don't make any money on non-gaming revenue.
I am surprised that Boyd passed on the opportunity to buy the entire resort. They he the right of first refusal.
Theories are that AC is so anathema at Wall Street that any investment there would hurt Boyd's stock. Another theory is that they are also being prepared to be taken over by another party, and that is occupying their time.
November 15th, 2010 at 4:36:35 AM
permalink
Pansy Ho?Quote: pacomartintheir dealings with Patsy Ho.
"Borgata brings in almost $700 million in gaming revenue a year, and it is the only resort with a substantial non-gaming revenue. Most of the other AC resorts don't make any money on non-gaming revenue.
I am surprised that Boyd passed on the opportunity to buy the entire resort. They he the right of first refusal."
Perhaps the divestiture is only on paper and the stock is merely being parked.
November 15th, 2010 at 4:51:17 AM
permalink
Quote: pacomartinTheories are that AC is so anathema at Wall Street that any investment there would hurt Boyd's stock. Another theory is that they are also being prepared to be taken over by another party, and that is occupying their time.
I thought another theory floated out there was that MGM was requiring Boyd to assume 100% of the debt associated with Borgata if they bought out the other 50%, which is why they refused. One stat which I found amusing was that Trump Marina had a revenue increase last month, but when you're at the bottom, I suppose you will have an occassional minor increase.
-B
November 15th, 2010 at 6:38:23 AM
permalink
Quote: pacomartinAC Hilton | -16.5%
Any word on Landry's taking over?
Also, Trump Marina is in the same district as Borgata and Harrah's Resort.
November 15th, 2010 at 7:06:49 AM
permalink
Could it be because Boyd Gaming is trying to reduce debt? Although, I would think buying a profitable casino would certainly be a way to do that...
November 15th, 2010 at 7:53:31 AM
permalink
The is kind of tangential to the topic, but did anyone else notice from the revenue reports that Harrah's AC lost money on craps this month? On a $6m drop? That's unfathomable...
"Dice, verily, are armed with goads and driving-hooks, deceiving and tormenting, causing grievous woe." -Rig Veda 10.34.4
November 15th, 2010 at 7:55:32 AM
permalink
Quote: teddysThat's unfathomable...
The last couple of times I've been there, including last week, the two regularly open tables were running pretty strongly. And I'm a don't bettor.
November 15th, 2010 at 8:06:59 AM
permalink
So I guess that means craps players should go there rather than other casinos? A dice cheating team perhaps? A lucky high roller?Quote: teddysThe is kind of tangential to the topic, but did anyone else notice from the revenue reports that Harrah's AC lost money on craps this month? On a $6m drop? That's unfathomable...
November 15th, 2010 at 6:46:00 PM
permalink
Quote: ElectricDreamsCould it be because Boyd Gaming is trying to reduce debt? Although, I would think buying a profitable casino would certainly be a way to do that...
I know that they are trying to reduce debt, but they have also been looking for investment opportunities to use the line of credit they secured for the Echelon. They tried to purchase Station Assets, and were very interested in the M Resort.
The M Resort went for about #1/4 billion, the same price as half the Borgata. I would think that the Borgata would be a better investment especially since Boyd is already the managing partner. Even half the Borgata has to have higher revenue that all of the M Resort.
November 16th, 2010 at 7:31:44 AM
permalink
Quote: pacomartinQuote: ElectricDreamsCould it be because Boyd Gaming is trying to reduce debt? Although, I would think buying a profitable casino would certainly be a way to do that...
I know that they are trying to reduce debt, but they have also been looking for investment opportunities to use the line of credit they secured for the Echelon. They tried to purchase Station Assets, and were very interested in the M Resort.
The M Resort went for about #1/4 billion, the same price as half the Borgata. I would think that the Borgata would be a better investment especially since Boyd is already the managing partner. Even half the Borgata has to have higher revenue that all of the M Resort.
That's a good point. I didn't know they tried to buy Station Assets.
That's a strange thing to do, express interest in expanding and then turn down something like the Borgata. They must have specifically not liked something about the Borgata, I guess? Or maybe AC in general?
November 16th, 2010 at 8:20:46 AM
permalink
I've never understood how an outfit like Boyd who owns a dump like Sam's Town LV could handle a nice resort like Borgata. Perhaps Boyd isn't jumping on the opportunity because it's way over their head.
November 16th, 2010 at 8:54:07 AM
permalink
Sam's Town is 31 years old, only slightly younger than California (35 years old). Borgata is only 7 years old. A company can evolve over the years. Look at the quality of the Station Casino Resorts built in the 1990's (Texas Station for example) and the ones built in the 2000's (Green Valley, and Red Rock). Even more striking is that George Maloof owned the two Fiesta casinos before he built the Palms.
Boyd is still the managing partner of Borgata. Although cash flow and profit are important , usually you purchase a casino for several years of revenue.
Half of the Borgata revenue for 2009 was $389 million, and Leonard Green & Partners bought it for about $250 million. Given that Borgata is having a terrible year, I won't call it a certain moneymaker, but I would have thought that Boyd would go for it at that price. My understanding is that the construction price was well over a billion dollars.
Boyd is still the managing partner of Borgata. Although cash flow and profit are important , usually you purchase a casino for several years of revenue.
Half of the Borgata revenue for 2009 was $389 million, and Leonard Green & Partners bought it for about $250 million. Given that Borgata is having a terrible year, I won't call it a certain moneymaker, but I would have thought that Boyd would go for it at that price. My understanding is that the construction price was well over a billion dollars.
December 7th, 2010 at 6:50:47 AM
permalink
Quote: pacomartinI won't call it a certain moneymaker, but I would have thought that Boyd would go for it at that price.
Here may be some of the rationale behind Boyd's decision:
"The study broke Atlantic City's 11 casinos into four groups by location. The three casinos in the city's marina district — The Borgata Hotel Casino & Spa, Harrah's Resort Atlantic City, and Trump Marina Hotel Casino — saw their gross gaming revenue per visitor hour fall by more than 41 percent over the last four years. The three casinos in the Inlet section — Trump Taj Mahal Casino Resort, Resorts Atlantic City and the Showboat Casino Hotel — fared even worse, down more than 49 percent."--Asbury Park Press (app.com) 12/7/10
March 5th, 2011 at 12:08:17 AM
permalink
Recent deals may mar MGM's Borgata sale.
Basically the sale of Resorts Atlantic City for $31.5 million and the $38 million that Landry's paid for the Trump Marina is making the potential deal with Los Angeles-based private equity group Leonard Greene & Partners for $250 million unravel. There may be an opt out clause.
Maybe Boyd will get the other half of the Borgata for much cheaper than the price they rejected.
Basically the sale of Resorts Atlantic City for $31.5 million and the $38 million that Landry's paid for the Trump Marina is making the potential deal with Los Angeles-based private equity group Leonard Greene & Partners for $250 million unravel. There may be an opt out clause.
Maybe Boyd will get the other half of the Borgata for much cheaper than the price they rejected.
March 5th, 2011 at 12:53:40 AM
permalink
Concerning Boyd being a takeover candidate....I don't follow Casino Stocks too closely but I can say with a high degree of comfort that Boyds is an unlikely takeover candidate. They have a Market Cap just under 900MM and an enterprise value just shy of 4BB. It doesn't mean they cant borrow more money or have the cash flow to keep credit flowing but for someone (Private Equity) to buy them at a premium with that kind of debt would have to have one hell of an exit strategy to sell off all but a few properties (at great prices). Insiders are net sellers of their stock over the last 6 months.
when man determined to destroy himself he picked the was of shall and finding only why smashed it into because."
— E.E. Cummings
March 5th, 2011 at 9:06:32 AM
permalink
I doubt that Boyd will be taken over by anyone else. They have a strong line of credit that they secured to build Echelon and they have been trying to take over other people. Candidates have included Rio Casino, M Resort, all or part of Station's Resorts. The other half of Borgata seems like a natural since they are the managing partner anyway. Perhaps if the price comes down, they will go for it.
March 14th, 2011 at 9:11:37 PM
permalink
It seems as if the $250 million offer made by the private-equity firm Leonard Green is no longer in the bidding, and it appears there are no other suitors, according to an unnamed source. MGM, even though it got 30 months to exit NJ, has only until September 2011 to handle the sale itself. If it fails, a trustee will sell it for them.
Perhaps Boyd is taking it's time until August or September, and then MGM will be forced to sell out for much less.
Borgata revenue went down -1.73% for Jan-Feb 2011, while Atlantic City as a whole went down -7.63%.
Perhaps Boyd is taking it's time until August or September, and then MGM will be forced to sell out for much less.
Borgata revenue went down -1.73% for Jan-Feb 2011, while Atlantic City as a whole went down -7.63%.
July 22nd, 2011 at 6:27:20 PM
permalink
Quote: pacomartinIt seems as if the $250 million offer made by the private-equity firm Leonard Green is no longer in the bidding, and it appears there are no other suitors, according to an unnamed source. MGM, even though it got 30 months to exit NJ, has only until September 2011 to handle the sale itself. If it fails, a trustee will sell it for them.
Perhaps Boyd is taking it's time until August or September, and then MGM will be forced to sell out for much less.
Borgata revenue went down -1.73% for Jan-Feb 2011, while Atlantic City as a whole went down -7.63%.
MGM seeks more time to sell Borgata share
It seems like that sale that MGM was publicizing fell through and the September deadline is approaching. Perhaps Boyd will get the property for just assumption of the debt after all.
Borgata revenue went down -11.1% for Jan-Jun 2011, while Atlantic City as a whole went down -10.5%.
July 22nd, 2011 at 6:32:46 PM
permalink
.....
July 22nd, 2011 at 7:02:04 PM
permalink
Quote: gofaster87I still cant understand ACs problem with the MGM/Pansy Ho partnership. Nevada was okay with it.
I think that NJ technically wanted to hold public hearings. They didn't outright say that it was not permitted. However, MGM probably felt that Pansy Ho would rather terminate negotiations than to have a potential partner drag her through public hearings.
Now that Trump has sold his 3rd casino, the Borgata is the #2 investment in AC behind Harrah's. It's also against the NJ law to allow one owner to control more than half of Atlantic City. So Harrah's could not expand to a fifth casino even if they wanted to.
Once again, I don't think the commission had a right to challenge MGM's present ownership. If they felt that strongly, then they should have made the hearings a condition on expanding ownership in New Jersey.
July 22nd, 2011 at 7:14:35 PM
permalink
.....
July 22nd, 2011 at 7:56:38 PM
permalink
Quote: gofaster87I wish they would have regulated ownership for MGM and Harrahs in Vegas. Competition is a good thing.
I don't know that it would help since nobody is close to 50% in Vegas.
Plus if Harrah's wants to buy the Trump Plaza and integrate it with Ceasars and Bally's I don't think the state should complain. Even if it puts them at close to 50% of NJ market.
July 22nd, 2011 at 8:08:14 PM
permalink
Quote: pacomartinif Harrah's wants to buy the Trump Plaza and integrate it with Ceasars and Bally's I don't think the state should complain.
That would be a supreme irony indeed. It was at the Plaza that Harrah's gave Trump his first taste of a gambling operation. Then he turned on Harrah's and forced them out of the property.
July 22nd, 2011 at 8:40:22 PM
permalink
Quote: SanchoPanzaThat would be a supreme irony indeed. It was at the Plaza that Harrah's gave Trump his first taste of a gambling operation. Then he turned on Harrah's and forced them out of the property.
David Schwartz take on history of Trump-Harrah's partnership
