Station Casinos Soars on Buyout Bid
By Nicholas Yulico
TheStreet.com Staff Reporter
12/4/2006 2:06 PM EST
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Updated from 12:08 a.m. EST
Station Casinos (STN - commentary - Cramer's Take - Rating) received an $82-per-share buyout offer, becoming the latest gaming company to attract private equity interest.
The buyout proposal came from Station CEO Frank Fertitta and Colony Capital, a private equity company that already owns several casinos, including the Las Vegas Hilton. The bid represents a 19% premium to the company's Friday closing price of $69.10.
Station's board has established a special committee of independent directors to review the proposal.
Shares of Station vaulted 21% on the news, and other casino stocks also jumped as investors tried to determine which company might be targeted next.
The Station bid marks the fourth major buyout offer targeting the casino industry this year. Earlier this year, Aztar and Kerzner were taken private. Harrah's (HET - commentary - Cramer's Take - Rating), one of the world's largest gaming companies, is currently evaluating a $15.5 billion buyout proposal by Apollo Management and Texas Pacific Group.
These deals provide evidence that the public markets may be having trouble getting at the true value of casino stocks.
Some have said in recent months that a company like Station may be expensive on an earnings basis. But such an analysis is missing part of the story, says Dan Ahrens, portfolio manager with the Gaming and Casino fund.
The Station bid "just really shows what these gaming stocks or casino stocks are worth when you think of the gaming value and the real estate value," Ahrens says.
"A lot of people were looking at this these stocks at their regular enterprise values, and looking at it as you would any retail stock or stocks of other industries," he says. However, such investors often missed the "extremely valuable real estate that these enterprises sit on."
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