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Full House Set to Acquire New Casino

Posted on September 16th, 2010

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In Indiana, a new casino battle is brewing—this time between a casino that is just getting its bearings again after an economic slowdown and a casino that is getting itself new owners. Penn National Gaming Inc.’s casino will have to face “new competition” from a facility just to the other end of the Ohio River. The new ownership is said to guarantee a new lease of life to the otherwise ailing casino resort. On Monday, Full House Resorts Inc., a casino operator based in Las Vegas has finally made known to the public a deal worth $43 million for the company to acquire the Grand Victoria Casino & Resort in Rising Sun, IN, which currently prides itself as housing 1,400 slots. The Grand Victoria facility is located on the base of the Ohio River. This casino is only close to 13 miles south of another casino, the one operated by Penn National Gaming. Hollywood Casino in Lawrenceburg, IN will also have to face a bit of competition internally, as Penn National is also at the hem of constructing two more casinos in the neighboring state of Ohio. In November of last year, Ohio voters have voted to approve the construction of four casinos in their state, with the inclusion of one on the western portion of Columbus.

Full House is already revved up with their own plans, claiming that the deal involving the Grand Victoria will be closed in the first quarter of 2011. Full House, which also includes in its list of properties the Stockman’s Casino in Nevada (which it owns) and FireKeepers Casino in Michigan (which it manages), would have to secure approvals in casino regulation and financing deals for the Grand Victoria concern to be finalized. The Grand Victoria Casino and Resort stands on 300 acres of land which includes a gaming area measuring 40,000 square feet hosting 37 table games, a hotel with 201 rooms and an 18-hole golf course that has a fully-operational clubhouse. The current owner of the site is Hyatt Hotels Corp’s affiliate in Chicago.
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Reports in the early part of this year have divulged that Grand Victoria has been losing a substantial part of its market share to the neighboring Hollywood Casino of Penn National. This Hollywood Casino in the area is the largest gaming facility in the southeast Indiana area. Even with the state, Hollywood Casino has outshined Grand Victoria. Hollywood contributed $17.4 million in total taxes to the coffers of the state, in comparison to Grand Victoria’s humble contribution of only $3.5 million. But Grand Victoria will face more competition aside from the ones already mentioned earlier. About 35 miles northeast of the Ohio River, another development is about to be introduced. A casino in Cincinnati will be constructed by Dan Gilbert, the current owner of the NBA team Cleveland Cavaliers. Gilbert’s development company also happens to be a partner of Penn National in the casino business.

Andre Hilliou, the CEO of Full House, in a press release stated that he finds the existing management of Grand Victoria as still very strong. However, he adds, “We believe that we can leverage our knowledge and proven track record of managing properties catering to local customers in competitive environments to further improve the profitability of the Grand Victoria, and we expect to see immediate returns on our investment.” Full House has been adding more properties to its portfolio. Aside from being the owners of Stockman’s and the managers of FireKeepers, Full House has also managed to charge a guaranteed fee from operating the Harrington Raceway and Casino which is located in Delaware. Harrington had $19 million in revenue in 2009 and accumulated $4.8 in earnings.

Among the other claims to fame of Full House is that it has former auto industry icon Lee Iacocca as one of its directors. In contrast, Penn National has more facilities in its portfolio. But with the 19 facilities that it either manages or owns, it lost $265 million last year, with revenues totaling $2.4 billion. Analysts said the sale will cost Full House a bit more than five times Grand Victoria’s current cash flow. Bill Lerner, principal of the Union Gaming Groups said that this shows how casino deals have been affected in the current economic environment. He adds, “This apparent low-acquisition multiple may be a function of a buyer capturing forthcoming competitive risk from Harrah’s in Cincinnati and accelerating risk from Penn’s expansion.”