Pinnacle Entertainment, Inc (PNK), Ameristar Casinos, Inc. (ASCA): Check Out These Regional Casinos

While the giant multi-billion dollar casinos in Macau, Singapore, and Las Vegas get all the attention because of their glamour, the regional casino players have a steady clientele and cater to the day tripper. As the U.S. economy has been recovering, locals are returning to their favorite casinos. In some respects, the regional players also benefit as it remains cheaper to visit a local or regional casino rather than make a trip to Vegas.

These two regional players are merging

Pinnacle Entertainment, Inc (NYSE:PNK) is in the process of finalizing the purchase of Ameristar Casinos, Inc. (NASDAQ:ASCA). The companies announced that they are divesting a planned project in Louisiana to help gain regulatory approval for their merger. The combination of the two companies would include 17 gaming properties with more than 5,000 hotel rooms, 23,500 slot machines, 640 table games, and more than 16,000 employees.

In a report from Stifel Nicolaus Capital Markets, analyst Steven Wieczynski said of the deal:

Given the limited overlap of properties between Pinnacle Entertainment, Inc (NYSE:PNK) and Ameristar Casinos, Inc. (NASDAQ:ASCA), on paper, this deal makes total sense. With regional gaming markets coming under pressure given additional competition, coupled with the number of the U.S. declining, we believe it makes total sense for certain regional gaming operators to team up in order to eliminate duplicate costs, especially on the promotional and marketing side.

Pinnacle Entertainment, Inc (NYSE:PNK) CEO Anthony Sanfilippo said that the combined companies will save at least $40 million annually. The combined companies will have debt of around $3.7 billion. The focus, after the merger is completed, will be on paying down debt and deriving cost synergies.

The biggest regional player

Penn National Gaming, Inc (NASDAQ:PENN) is one of the largest regional gaming companies with over $3 billion in revenue. Penn National operates 29 gaming and racing facilities with a focus on slot machine entertainment. In total, the company operates approximately 34,500 gaming machines, 850 table games, 2,900 hotel rooms, and 1.6 million square feet of gaming floor space.

Shares of Penn National Gaming, Inc (NASDAQ:PENN) have been under pressure this month as it reported weak second-quarter results. Competition and bad weather kept customers away from its casinos during the quarter. Penn National faced heavy competition in Ohio, where Caesars Entertainment Corp (NASDAQ:CZR) opened a new casino and offered discounts to players. Penn National posted a net loss in the quarter of $12.2 million compared to a profit of $66.7 million last year.

Going forward, Penn National Gaming, Inc (NASDAQ:PENN) plans to split into two publicly traded entities. One company will own the casinos while the other will manage them. According to an analyst report from J.P. Morgan, the firm sees the deal enhancing the company’s ability to distribute its significant free cash flow in a tax efficient manner, enhance longer-term growth opportunities, and lower its cost of capital.