Summary
Ron usually is spot on in his Las Vegas analysis but I think he has missed the boat on this one
Analysis
I actually think that now is the Perfect time to have Penn Gaming get into the Vegas market and indeed, on the strip. First, whether Harrahs or MGM wishes to get into a fire sale scenario is really out of Jim Murren's or Gary Loveman's hands. The bondholders and bankers are in charge and may want to see these giant companies part with some of their vegas properties and have additional cash on their balance sheet. In particular, MGM would be wise to sell a couple of strip properties and keep Detroit and Biloxi which are rumored to be on the block. This would help diversify MGM from the Vegas-centric scenario that now exists. So, why should Penn come into the market now? Well the pricing of a purchase probably will never be better than it is today. A mutiple that used to be 10 times ebitda or more is now probably in the 5-7 times range. Properties like Excalibur, circus-circus which are not core MGM properties probably would go in that range. Another pime reason to get in the vegas market is to have a place to reward their regional clientile. What I mean by that is, have a flagship property where the charlestown, wv and lawrenceburg, in. customer can aspire to go to. Penn can utilize their database to bring new customers to vegas and aid the whole town while they begin to operate in the city.
With Tim Wilmot as COO they have the capability to operate high volume/large hotel properties and now is the time to get into Vegas and graduate to the major leagues.
