Colony Capital Acquisitions is working furiously in their attempt to become the country’s third-largest casino company. Colony currently owns the Hilton casinos in both Las Vegas and Atlantic City and also the Resorts casino in Atlantic City. Yesterday Colony, which is a privately held Los Angeles real estate investment firm, offered to buy Aztar Corporation for $1.4 billion in cash. Aztar currently owns the Tropicana casinos in Las Vegas and Atlantic City and a combination of the two companies would generate a stock value of about $5 billion. The $5 billion figure would place Colony in third position, well behind Harrah’s Entertainment ($14.4 billion) and MGM Mirage ($12.3 billion).

On business note here is that Aztar Corporation had been in talks with Pinnacle Entertainment for the sale of the Tropicana in Las Vegas. In fact, it was widely believed that the Pinnacle deal would be completed. Pinnacle has declined to speak about the Colony bid, but they do have three days to make a counter offer. It is also believed that if the bid eventually goes to Colony that they will have to pay Pinnacle a $40 million break-up fee.

Colony is controlled by Thomas J. Barrack Jr. and they are known for making their casino decisions based more on the real estate market than the casinos themselves. The Las Vegas real estate market has been soaring and the Tropicana in Las Vegas, which sits at the intersection of Las Vegas Boulevard and Tropicana Boulevard, is a hot property. In Atlantic City the more than 20 acres of undeveloped land are what is of primary interest to Colony. Generally speaking a Colony takeover of Aztar properties would leave many acres of undeveloped land throughout the United States, which is a potentially powerful tool in increasing stock price.

If this deal does go through Colony will have to sell one property in Missouri due to licensing issues. Fortunately for them, this is a relatively small regulatory hurdle. This would be a large deal in the United States casino industry, but like I mentioned the deal is not final and Pinnacle can still make a counteroffer. I am leaning towards the Colony proposal based on what I have heard, but that ultimately means very little. One thing that has become obvious is that the Tropicana in Las Vegas or more specifically that location is the key for both groups and is the likely site fore major changes in the future.

Article by Angela Ford