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Pinnacle (PNK), Ameristar (ASCA) Deal to Close, But Uncertain Timeline Creates Risk

May 30, 2013 9:35 AM EDT Send to a Friend
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Price: $22.10 --0%

Rating Summary:
    8 Buy, 6 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 17 | Down: 18 | New: 2
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Janney Capital is out with a few comments about the Federal Trading Commission (FTC) moving to block the proposed merger between Pinnacle (NYSE: PNK) and Ameristar Casinos (Nasdaq: ASCA).

Analyst Brian McGill noted that it would be "extremely" easy to divest a property in St. Louis, MO, given "that it is a supply-constrained market with the number of licenses. We think there is also a significant amount of capital looking at gaming assets and that would result in an adequate multiple."

Overall, expectations are that the deal will be completed, though the timeline is now uncertain. Previous expectations called for a Q313 closing, but the FTC announced a hearing scheduled for October 28th.

On Pinnacle, there is now increased risk that the deal might fall apart. McGill comments, "While these developments are absolutely a set back, we think the possibility that REITs look to purchase gaming assets is a positive that should contribute to multiple expansion. Also, if [Pinnacle] were to sell several assets, we expect they would utilize this cash to reduce debt levels."

The firm maintains a Buy rating on Pinnacle with fair value of $24 and Neutral on Ameristar with fair value of $26.50.

For an analyst ratings summary and ratings history on Pinnacle Entertainment click here. For more ratings news on Pinnacle Entertainment click here.

Shares of Pinnacle Entertainment closed at $18.92 yesterday.




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