Pinnacle Entertainment Inc. Wednesday upped the ante in a bidding war over rival casino owner Aztar Corp., increasing its bid to $1.65 billion, or $43 a share, but Aztar said it still appeared to fall short.
Aztar, owner of the Tropicana hotels in Atlantic City and Las Vegas, said closely held casino owner Columbia Sussex Corp.’s previous $47-a-share offer looked higher.
Aztar, prized for the 34 acres of land it owns on the Las Vegas Strip, has been the focus of a bidding war among four different companies since March, including Columbia, Ameristar Casinos Inc., Colony Capital Acquisitions LLC, and Pinnacle, whose shares fell more than 2 percent in Wednesday’s trading.
Columbia’s offer, worth more than $1.69 billion, “continues to be reasonably likely to result in a superior proposal,” Aztar said in a statement, adding that it was still evaluating the bid.
Columbia’s offer values the land Aztar owns in Las Vegas at more than $20 million an acre, according to a recent research note by Deutsche Bank analyst Marc Falcone. “This would be the highest value paid for such a large site in Las Vegas,” he wrote.
The bidding war is likely to eventually take a toll on the bidders as the price escalates, said CIBC World Markets’ analyst William Schmitt.
“Offers have reached the point of not what is reasonable but instead what can the bidder afford, leaving very little on the table for the shareholders of the winning bidder,” he wrote in a research note.
Phoenix-based Aztar has proven to be an attractive target especially for the Las Vegas land — one of the last parcels available in the U.S. gambling mecca.
Pinnacle, which owns casinos in Louisiana, Indiana, and Reno, Nevada, has said that it plans to spend between $2 billion and $3 billion on redeveloping the land, now the site of Aztar’s Tropicana casino.
Pinnacle and Ameristar are both based in Las Vegas but have no casinos in Atlantic City and Las Vegas, the two largest U.S. gambling markets.
An Aztar acquisition would help them take on larger operators like Harrah’s Entertainment Inc. , which offers discounts at its casinos in the two gaming hotbeds to reward loyal customers at its other casinos.
Pinnacle, which first bid $38 a share for Aztar in March, said its new offer includes about $1.65 billion in equity on a fully diluted basis and the refinancing of all of Aztar’s outstanding debt.
Pinnacle’s offer was subsequently outbid by Ameristar, which owns casinos in Mississippi, Colorado, Missouri and smaller markets in Nevada, and real estate investment firm Colony Capital.
Colony bid $41 a share, but it too was outbid by Ameristar, which first offered to pay $42 a share but subsequently increased it to $43 a share.