|By Suzette Parmley, The Philadelphia
InquirerMcClatchy-Tribune Business News
Sep. 6, 2006 - Las Vegas-based Pinnacle Entertainment Inc. will buy the Sands Hotel & Casino -- the smallest casino in an Atlantic City that has been getting bigger and brighter -- and a neighboring site along the Boardwalk, for about $250 million.
Yesterday's announcement capped weeks of speculation about Pinnacle's plans to try to acquire an Atlantic City casino. The company was outbid in May in its protracted attempt to buy Aztar Corp., the owner of the Tropicana Casinos in Atlantic City and Las Vegas.
The Sands and the adjacent land, which is the site of the former Traymore hotel, are owned by business entities affiliated with billionaire Carl Icahn. Pinnacle will pay an additional $20 million for some tax-related benefits and other real estate.
Icahn, the owner of three casinos in Las Vegas, took control of Atlantic City's Sands in 2000.
The companies said the hotel-casino would be closed by mid-November, with 2,100 employees to get 60 days' notice of the expected date. They will receive severance packages.
"It's a great location, but you will have to tear down and start from scratch," said gambling analyst Larry Klatzkin of New York-based Jefferies & Co.
That appears to be the game plan. The statement from Pinnacle and the Sands said there were plans to close, demolish, and later replace the existing casino with a bigger casino hotel.
"After spending many months reviewing various projects for the property, it became patently clear that a shutdown of the Sands was necessary and inevitable to make room for a great new casino," Icahn said in a statement. "We also concluded that this was the most propitious time to undertake the shutdown, given the robust employment environment in Atlantic City."
The gambling resort is in the midst of a building renaissance. A revamped, expanded Sands would likely be competing against not only Atlantic City's 11 other casinos -- several of which have added new hotel towers and other attractions -- but also a new billion-dollar-plus gambling palace that Morgan Stanley plans to break ground on in late 2008.
Pinnacle, an aggressive midsize operator that owns primarily riverboat casinos in the Midwest, has been on the prowl to expand its holdings. It has applied for a gambling license in Pennsylvania, as one of five groups vying for two Philadelphia-tied licenses to operate a $300-million-to-$400-million slots parlor on the Delaware.
"This major new resort will be a key component in our plan to build a national network of gaming properties," said Daniel R. Lee, Pinnacle's chairman and chief executive officer, in a statement about the Sands purchase. "It will also help extend our development pipeline and our company's growth through 2010 and beyond."
Besides the Sands casino, Pinnacle will acquire 18 acres of contiguous land, which includes the site of the former Traymore hotel that sits between the Sands and the Boardwalk.
The casino's boutique size and hemmed-in location at Indiana Avenue and Brighton Park have restricted its ability to expand like the other casinos and to remain competitive. Even Resorts Casino Hotel, a casino similar in size to the Sands, added a new hotel tower with 399 rooms in July 2004.
Observers say the Sands' attractiveness to potential buyers shot up after it acquired the old Traymore parcel in the spring. Icahn said at the time that he was looking at the possibility of packaging the casino and land and selling them together.
"The announcement immediately transforms an afterthought of a property into the talk of the town," said Joe Weinert, a gambling consultant and managing editor of the trade publication Gaming Industry Observer. "A property previously landlocked on a six-acre footprint will, in about four years' time, become, we believe, a master-planned masterpiece stretching from the Boardwalk to Pacific Avenue."
Turmoil for the Sands, built 26 years ago, began in the mid-1990s with mounting debt. It filed a bankruptcy petition in January 1998, which led to Icahn's becoming owner in 2000. Four years later, the Sands' parent company, GB Holdings Inc., transferred ownership of the casino to Atlantic Coast Entertainment Holdings Inc. -- which triggered another round of bankruptcy in September 2005.
That piece of the Sands' troubled financial past is being played out in a Camden courtroom, as bondholders want Icahn to make good on notes that matured before GB Holdings filed for bankruptcy.
"We're certainly interested in the sale of the Sands, because we believe, and have always believed, that the value of the asset will far exceed the bondholders' debt," said Wilmington lawyer Steve Yoder of the Bayard Firm, who is representing the largest non-Icahn-related shareholder in the case.
The committee, comprising large bondholders, will have its next hearing Friday before U.S. Bankruptcy Judge Judith Wizmur in Camden.
Contact staff writer Suzette Parmley at 215-854-2594 or email@example.com.
Copyright (c) 2006, The Philadelphia Inquirer
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