To put it in gambling terms, Golden Gaming Inc. has doubled down on Nevada.
The privately held company is best known as the operator of 40 taverns in Las Vegas and Reno. But Golden Gaming will more than triple the size of its current slot machine route business next year when it takes over the operations now owned by rival Affinity Gaming.
Once state gaming regulators sign off on the transaction, Golden Gaming will become Nevada’s largest slot machine route operator, with more than 8,000 games in some 640 locations.
The route business — in which a company operates slot machines in noncasino locations such as bars, taverns, restaurants, grocery stores and convenience stores — took a revenue hit the past few years.
Voters banned smoking in locations that serve food in 2006, sending gamblers to traditional casinos. Unemployment, the housing market implosion and Nevada’s overall economic meltdown also zapped consumer spending.
Golden Gaming Chief Executive Officer Blake Sartini said the state has survived.
“We believe in the long-term economic prospects for Nevada,” Sartini said. “The landscape has changed and a lot of those issues have been filtered through.”
Sartini, 52, is a life-long Nevadan. He is also brother-in-law to Station Casinos owners Frank Fertitta III and Lorenzo Fertitta. Sartini spent 15 years with Station Casinos in various management and senior executive positions, including time on the board of directors. He no longer has any ties to the casino company other than family connections.
The transaction with Affinity — formerly known as Herbst Gaming — is bringing Golden Gaming back to its founding business element. Sartini started the company as route operation in the early 1990s with 900 slot machines when it was known as Southwest Gaming Services.
When the tavern business began to expand, Golden Gaming was formed. The company’s current route business has 2,500 slot machines in 200 locations.
The business is unique in the gaming market. It’s 100 percent owned by the Sartini family and does not have any publicly owned debt. The company’s financial information, such as revenues and cash flow, are not publicly disclosed.
For some perspective, the Affinity slot machine routes had revenues of $45 million in the second quarter and $90.6 million for the first six months of the year.
The deal with Affinity had other pieces. The Herbst family, through its recently established Jett Gaming, is acquiring the slot machines routes for its Terrible’s convenience store locations. Golden Gaming is also acquiring Affinity’s two casinos in Pahrump while Affinity is taking over Golden Gaming’s three casinos in Colorado.
To Sartini, the magnitude of the deal is Golden Gaming’s commitment to Nevada. The company already owns the Pahrump Nugget and will become Nye County’s largest employer and the largest operator of gaming devices when it takes over Terrible’s Town and Terrible’s Lakeside. After the acquisition, Golden Gaming will have approximately 2,000 employees.
The slot route acquisition will give the company control over games inside CVS Pharmacies, and the Safeway, Smith’s and Albertsons grocery stores.
The transaction also makes Golden Gaming a partner with rival tavern operators. When the deal closes, almost 93 percent of the company’s machines will be outside its wholly owned PT’s, Sierra Gold and Sparky’s taverns.
“We have an obvious economic incentive to make sure our route partners are successful,” Sartini said. “It’s actually a positive because we know the challenges of operating small taverns and we can impart that knowledge on our route partners.”
Sartini has not been shy about Golden Gaming’s involvement in controversial issues, such as the recent Dotty’s matter. Last month, the company gained regulatory approval to use high-tech sports wagering kiosks operated by bookmaker Leroy’s inside its taverns. The Nevada Resort Association and some of the major gaming companies, including Station Casinos, aren’t happy with the concept.
“Fortunately, the (resort association) doesn’t regulate gaming in the state,” Sartini said.
There could be some interesting family conversations when the Sartinis and the Fertittas get together.
“Frank and Lorenzo are great operators,” Sartini said. “We both wish each other well in our business endeavors.”
Howard Stutz’s Inside Gaming column
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