Who Would Buy Ameristar Casinos?

Ameristar Casinos may be looking to sell itself, according to the 'New York Post.' Who would be the most likely buyer? Take our poll, and see what 'TheStreet' thinks.
Author:
Publish date:

(Ameristar Casinos article updated for analyst commentary on likely buyers of Ameristar, as well as stock movement.)

NEW YORK (

TheStreet

) --

Ameristar Casinos

(ASCA)

may be putting itself up for sale, according to the

New York Post

.

According to the report, Ameristar hired investment bank Lazard Capital and is taking names of potential bidders. A sale is expected to start in the fall, the

Post

said, citing sources familiar with the matter.

The news is sending shares of Ameristar surging 14.4% to $16.59 in morning trading.

Earlier in the month, Ameristar reported a second-quarter loss of $25.9 million, or 43 cents per share, a wider loss than then the year prior. The casino operator was especially hurt by increasing competition in St. Louis, after

Pinnacle Entertainment

(PNK) - Get Report

opened its River City property in March.

Ameristar has also seen a negative impact at its East Chicago, Ind. casino, due to a closed bridge that is impeding access to the property.

As of June 30, its debt stood at $1.63 billion.

So who would buy Ameristar? Sterne Agee analyst David Bain believes there are limited realistic potential buyers. "But foreign companies looking to enter the U.S. market in what would be a trough period

and private equity," are always a possibility, he said.

Penn National Gaming

(PENN) - Get Report

could also be a potential bidder, as it is one of the healthiest regional operators and may want to "take that next big step up the EBITDA food chain," Bain said.

Boyd Gaming

(BYD) - Get Report

could also look at Ameristar's properties, since there is little geographical overlap and a potential deal would diversify it away from Atlantic City and the Las Vegas locals market, J.P. Morgan analyst Joseph Greff wrote in a note.

"While a Boyd deal would likely involve new equity issuance, a potential transaction would be EPS accretive and reduce its leverage ration, while increasing overall debt and reducing free cash flow per share," he wrote.

Greff says Penn and Pinnacle are less likely buyers, since both have other capital expenditures and greater geographical overlap than Boyd.

The quality of Ameristar's assets is high by regional gaming standards, as it generates strong margins and is typical tops in market share in the regions it operates.

"Don't let the market cap fool you, we believe with the debt load, a buyer does not walk out of the store with the assets for under $3 billion or so," Bain said. "If you have a bullish longer-term view of the domestic economy, however, ASCA could make for an excellent acquisition."

Still, Bain doesn't think it is likely a deal will actually go through. "They could be testing the waters to get a look, which simultaneously does nothing to hurt its share price as Ameristar has been out of favor, especially over the past few months," Bain said. "On the other hand, many have viewed this company up for sale for a long time now and this just makes it official. We are a bit surprised by the timing, however, given where shares are trading."

What do you think? Who would be the most likely buyer of Ameristar? Take our poll below, and see what

TheStreet

thinks.

-- Reported by Jeanine Poggi in New York.

Follow TheStreet.com on

Twitter

and become a fan on

Facebook.