Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Divestitures would resolve FTC challenge to casino operator combination, (Aug 13, 2013)

By Jeffrey May, J.D.

In order to resolve FTC concerns that their proposed $2.8 billion merger would likely harm competition in the markets for casino services in the St. Louis, Missouri, and Lake Charles, Louisiana, areas, Pinnacle Entertainment, Inc. and Ameristar Casinos, Inc. have agreed to sell casino properties in both areas (In the Matter of Pinnacle Entertainment, Inc., FTC Dkt, No. 9355, FTC File No. 131 0064).

In May, the FTC issued an administrative complaint challenging the deal on the ground that it posed substantial antitrust concerns for casino services. According to the FTC, the casino services market consists of slot, video poker, and table gaming, along with associated amenities that are used to drive gaming revenue, including hotel accommodations, food and beverages, and entertainment.

Pinnacle and Ameristar are both Nevada-based companies that own and operate casinos in a number of markets throughout the country. Pinnacle owns and operates nine casinos and horse racing facilities in five states, while Ameristar owns and operates eight casinos in six states and is in the process of building its ninth casino.

In the St. Louis area, where Pinnacle and Ameristar are direct competitors, the acquisition, as originally proposed, would have reduced the number of casino service providers from four to three. In the Lake Charles area, Pinnacle operates one casino, while Ameristar is building a new casino set to open in 2014 that will be located directly adjacent to the existing Pinnacle casino—L'Auberge Lake Charles Casino Resort.

Under the terms of a proposed consent order, Pinnacle would be required to sell its Lumiere Place Casino in St. Louis to a buyer approved by the Commission within six months. If the Lumiere Place Casino is not divested to an approved buyer within six months, the proposed order would allow the Commission to require instead that Pinnacle divest the Ameristar Casino Resort Spa St. Charles in a suburb approximately 22 miles from downtown St. Louis.

In addition, the company would be required to sell its interest in the casino and resort property that Ameristar is developing and had planned to open in Lake Charles in 2014, to a Commission-approved buyer within six months. Pinnacle has identified Golden Nugget as the potential buyer for the Ameristar Lake Charles development. If, however, that property is not divested to an approved buyer within six months, the proposed order would allow the Commission to require instead that Pinnacle divest Pinnacle’s L’Auberge Casino Resort in Lake Charles. Each sale would also include all of the assets required to operate each divested casino as a separate business, according to the FTC. The parties have agreed to maintain the two casino properties being sold as viable, competitive, and ongoing businesses, under an order to hold separate and maintain assets.

Attorneys: Jeremy P. Morrison for FTC. W. Stephen Smith (Morrison & Foerster LLP) for Pinnacle Entertainment, Inc. Adam J. Di Vincenzo (Gibson, Dunn & Crutcher LLP) for Ameristar Casinos, Inc.

Companies: Ameristar Casinos, Inc.; Pinnacle Entertainment, Inc.

News: Antitrust FederalTradeCommissionNews