Jackpot

Missouri's "get-tough" gaming commission gives an embattled casino what it wants

On paper, at least, Station executives more than recouped the fine when the company's stock jumped $1.38 the day the settlement was announced. Their stake of about 27 million shares -- between 41 and 42 percent of the outstanding stock -- increased by nearly $37.3 million in one day. Although the stock plummeted a year ago when the Lazaroff scandal scuttled a Station bid to buy a Kansas City casino, it's been rising steadily since mid-October, when company executives announced the Ameristar sale and reported record third-quarter income, including $85.2 million in net revenue from Station's Missouri casinos. The stock's rising trend will likely continue, according to Wall Street analysts who believe the company's Nevada properties are undervalued.

"I think it (the settlement) was in line with our expectations," says Eric L. Hausler, an analyst with Bear Stearns in New York who was present at the October hearing when Nikolaisen threatened the $1 million-per-day fine. At the time, Hausler -- who had the stock on his "buy" list -- said he believed the Missouri investigation was keeping Station (then at $15 a share) from hitting the $20 mark. Now, Bear Stearns has a target price between $22 and $24.

The day before the settlement announcement, Bear Stearns issued a report to investors stating the major risks with Station were the Lazaroff matter and the company's sensitivity to economic downturns beyond its control. "You're taking out what we consider to be the biggest risk to the company at this point," Hausler says. "I still think it would have been a tough case to prove. Missouri doesn't want to shut those boats down. It appeared they wanted Station out of the state. And so both Missouri and Station are in a win-win situation here, where they're getting Station out of the state and they're getting a substantial fine for what could have dragged into a long administrative process."

The Missouri Gaming Commission may grant Ameristar a gaming license, a condition of the sale, as early as Dec. 20, when the commission's staff expects to present a recommendation. Station will use money from the sale to finance casino purchases in Nevada, where it's been on a spending spree since last summer. Station has reached deals to buy two Las Vegas casinos for a combined $390 million and has also agreed to buy an Ameristar casino in nearby Henderson for $70 million. When all the deals close, Station -- which sells itself as a company that caters to Las Vegas locals as opposed to tourists -- will own seven casinos in Henderson and Las Vegas. (In response to concerns that it may be monopolizing the local market, Station has defended itself by pointing out it controls only 10 percent of the city's slot machines -- still an awful lot of one-armed bandits.)

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