Massive Bidding War Ends in Aztar Sale

Aztar Corporation (NYSE: AZR) is getting bought – finally.

...(the gaming affiliate of Columbia Sussex) for $54 per common share in a deal valued at $2.75 billion including the assumption of about $676 million in debt.

What was at stake was not only one of Atlantic City ’s top properties, but also the Tropicana in Las Vegas which sits on 34-acres of prime real estate on the Strip. It was expected that any company winning the right to buy Aztar would implode the property in favor of creating an all-new casino experience.

An Aztar sale was first announced on March 13 when its Board of Directors said the company would be acquired by Pinnacle Entertainment (NYSE: PNK) in a deal for $38 per common share. Aztar’s board was satisfied with this initial offer since it represented a 24% premium over its stock price on March 10, 2006. However, it became immediately apparent that Aztar Pinnacle agreement was seriously undervalued as other gaming companies quickly pounced on Aztar with offers that waylaid the initial deal.

What happened next was one of the most dizzying games of one-upmanship the casino gaming industry had ever seen. Colony Capital reportedly offered $41 a share but was quickly outfoxed by Ameristar Casinos, Inc. (Nasdaq: ASCA) with its April 3 announcement it would try to acquire Aztar for $42.00 per common share, or about $2.25 billion cash plus assumption of debt. A few days later Ameristar upped its bid by one dollar per share to make the offer more attractive. Pinnacle Entertainment fired back by raising its bid to $45 per share on April 19.

In a completely unexpected move days later, Columbia Entertainment submitted an unsolicited bid for $47 a share, upping the ante to $2.47 billion. So Pinnacle’s next salvo was for $48 per share on April 28, upping its previous offer by $3 a share.

On May 1, Aztar determined though the Pinnacle offer was for slightly more money, the Columbia Entertainment offer was superior. Not to be outdone, Pinnacle responded with yet another bid increase and pumped the selling price to $51on May 5.
Finally the winning $54 per share bid by Columbia was accepted on May 19. Credit Suisse has provided Columbia with a firm commitment for $3.15 billion in debt financing. In the deal Columbia will get ownership of Aztar's Tropicana casino resorts in Atlantic City, NJ and Las Vegas, NV; Ramada Express casino hotel in Laughlin, NV; and Casino Aztar riverboat casino in Evansville, IN.

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"This is a breakthrough transaction for our company which will significantly enhance our gaming assets in key growth markets and strengthen our position as one of the leading owners, developers and operators of hotels, resorts and casinos," said William J. Yung III, President and CEO of Columbia Sussex. "Aztar's unique assets are a perfect fit with our existing hotel and gaming properties, and we see many opportunities to improve financial performance by expanding the Tropicana brand, finishing the building projects in Indiana and Atlantic City and developing the Las Vegas property. We look forward to working with Aztar's talented managers and employees to maximize the potential of these properties as we leverage our 25-year track record as a successful owner, builder and operator."

Columbia has made a deposit of $313 million, payable to Aztar in certain circumstances (including failure to obtain regulatory approval), if the merger agreement is terminated. The transaction is subject to regulatory approvals and customary closing conditions and is expected to close by the end of the year.

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