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Harvey's Casino Resorts

has agreed to buy

Pinnacle Entertainment

(PNK) - Get Pinnacle Entertainment Inc Report

for at least $631 million, the companies said Monday.

But investors showed caution in bidding up shares of Pinnacle, which gained only 3/8, or 1.90%, to 20 1/8 Monday, despite the $24 a share offer. (Pinnacle finished Monday up 5/16, or 1.6%, at 20 1/16.) Harvey's has not yet secured financing for the deal, which the companies do not expect to close until the end of the year. And the companies must gain approval from several groups of powerful regulators.

Under the deal, Harvey's, which is owned by

Colony Capital

, would pay $24 a share for Pinnacle's outstanding stock, while Pinnacle's senior managers would contribute $50 million in stock and keep their jobs.

Wall Street analysts said they had expected a slightly higher price, though the offer seems reasonable. Two analysts said the terms amount to around seven times their estimates of Pinnacle's cash flow. The number is expected to be around $150 million in 2001, after the company sells its casinos,

Boomtown Biloxi

and

Casino Magic

, both located in Mississippi, and completes building the

Belterra Resort and Casino

in Southern Indiana, about 35 miles southwest of Cincinnati, Ohio.

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In the industry, smaller riverboat casino companies have changed hands for around $6 to $7 times cash flow recently, including

Isle of Capri's

(ISLE)

$420 million purchase of

Lady Luck Gaming

, which closed last month. Larger casino operators have fetched around nine times their projected cash flow.

Harvey's sent Pinnacle a letter of interest on March 8, the day after California passed a referendum allowing casinos controlled by Native American tribes to expand their slot machine businesses and add blackjack tables. Though the new competition posed little threat to Pinnacle's two card club casinos in the Los Angeles area, it could siphon business from

Boomtown Reno

, the company's casino in Verdi, Nevada.

Harvey's offered to sweeten the deal by an additional $1 a share if Pinnacle manages to sell 97 acres it owns in Inglewood, Calif., for at least $40.75 million by Dec. 31, 2001. The offer drops proportionately if Pinnacle sells the land for as little as $13.1 million and becomes worthless to Pinnacle shareholders below that price.

The companies extended their exclusive talks on March 30, but Pinnacle's stock price has not gained significantly since the talks were first disclosed, when they moved from around $16 to the current price.

"The timing of it is still uncertain," said Michael Lavery, a

McDonald Investments

analyst. He rates the stock a buy and his firm has not done underwriting for Pinnacle. "It's not going to see $24 anytime soon."

To complete the deal, Harvey's would need approval from regulators in Louisiana, Indiana and Mississippi, where Pinnacle still has one more outfit,

Casino Magic Biloxi

, which is not for sale. The deal would also need approval from regulators in Iowa and Colorado, where Harvey's operates casinos. And Nevada regulators, who are scrutinizing a long backlog of pending mergers, must also approve the agreement.

Harvey's has hired

CIBC World Markets

as its banker, and Bear Stearns is a consultant, a company official confirmed. Analysts said that Pinnacle officials were concerned whether Harvey's would be able to finance the deal but that those officials seemed convinced Monday morning. Harvey's said it has received what it called "highly confident" letters from unnamed banks.

The deal also requires approval from Pinnacle shareholders.