Casino acquisitions open Boyd Gaming to customers in major metropolitan markets

July 27, 2018 4:01 AM
  • Howard Stutz, CDC Gaming Reports
July 27, 2018 4:01 AM
  • Howard Stutz, CDC Gaming Reports

Boyd Gaming Corp. is expected to add five casinos across four states to the company’s portfolio by the end of the year. The transactions, CEO Keith Smith said Thursday, will open the Las Vegas-based casino operator to potential customers in four large major metropolitan cities.

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During Boyd’s second quarter earnings call with analysts Thursday, Smith said Philadelphia, Cincinnati, St. Louis, and Kansas City may be populated with casino patrons already familiar with Boyd casinos in other markets.

“We really won’t know until we look at the databases,” Smith said in an interview following the earnings call. “The ability to introduce our portfolio to large markets of potential new customers is a tremendous opportunity.”

Boyd is acquiring the operations of four properties from Pinnacle Entertainment – the two Ameristar casinos in Missouri and the Belterra gaming brands in Indiana and Ohio – for $575 million. Boyd will sign a lease agreement with Gaming and Leisure Properties, a real estate investment trust that is the landlord for the Pinnacle-owned casinos.

Also, Boyd is acquiring the Valley Forge Casino Resort in Pennsylvania for $280.5 million.

Smith said Boyd would consider additional deals with gaming REITs, because it “provides a form of financing to acquire assets.” Boyd was silent acquisition front for more than five years, until the company bought three Las Vegas-area casinos in two separate deals in 2016.

The company currently operates 24 casinos in seven states. The five pending casino acquisitions will keep Boyd as the second-largest U.S. regional casino operator behind Penn National Gaming.

“We will continue to be a buyer of assets,” Smith said. “We evaluate everything.”

On the conference call, Smith said Boyd will launch sports betting in Mississippi at the Imperial Palace in Biloxi and Sam’s Town Tunica by football season, if the company is approved by state gaming regulators next month.

“We have the knowledge and experience doing this for 40 years,” Smith said. “We will have the technology and the sports books will be built out. We have 11 properties right now that we set the line for. One more isn’t too hard.”

However, the company is “closely evaluating” sports betting in Pennsylvania because of the state’s high tax rate and expensive licensing fee. Smith wants to make sure “it makes sense” to add the amenity to the Valley Forge casino.

In the quarter that ended June 30, Boyd Gaming grew revenue 2.1 percent companywide to $616.8, which included increases in all three of the company’s operating segments.

The company’s net income declined by almost $10 million to $38.9, which was attributed to discontinued operations, including payments received from the company’s previously-sold interest in Borgata in Atlantic City. Earnings per share for Boyd was 34 cents.

Total adjusted cash flow was $163.4 million, up 8 percent from $151.4 million in the second quarter of 2017.

Smith pointed out the company’s Las Vegas locals market casinos grew cash flow for the 13th straight quarter and each of the company’s three downtown Las Vegas properties had both revenue growth and double-digit cash flow increases. Visitation continued to grow in downtown, Smith said.

In June, Boyd acquired Lattner Entertainment, a distributed gaming operation in Illinois that manages roughly 1,000 slot machines at 200 locations where alcohol is sold. Financial results from the business is included in the company’s Midwest and South region. Boyd CFO Josh Hirsberg said the company saw less than $1 million in a financial contribution from Lattner in the quarter. Boyd only owned the business for roughly 30 days during the reporting period.

In an interview, Smith said the company will explore distributed gaming opportunities in other states and is looking to grow its presence in Illinois.

The company announced earnings after the market closed. Shares of Boyd Gaming, traded on the New York Stock Exchange, closed at $36.49, down $1.23 or 3.26 percent.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.