Pinnacle sells assets in deals possibly worth $26 million

Pinnacle Entertainment on Thursday announced the sale of the company's only casino in Nevada.

The Las Vegas-based company agreed to sell its Boomtown Casino and adjacent land in Reno in two separate transactions for potentially $26 million.

Pinnacle reached the transactions with M1 Gaming Reno, LLC and SJP Reno Property, LLC for approximately $22.2 million.

Pinnacle could collect an additional $3.8 million if an option granted to the casino-resort buyer is exercised.

This transaction is subject to Nevada regulatory approval and is expected to close by mid-2012. Last month during the company's third quarter earnings announcement, Pinnacle classified the Boomtown Reno segment as a discontinued operation and said the property was for sale.

"We believe Boomtown Reno will be well served by its new ownership team," Pinnacle Chief Executive Officer Anthony Sanfilippo said in a statement.

M1Gaming President Dean DiLullo said the owners would invest and redevelop Boomtown. DiLullo spent more than 13 years as an executive with Station Casinos, including time as general manager of Sunset Station. He also was chief operating officer of Planet Hollywood Resort for a year.

The 318-room Boomtown sits on more than 570 acres off Interstate 80. The property uses 73 acres, including 28 acres sold in 2006 to Cabela's, a national outdoor sporting goods retailer. Boomtown also has a 203-space recreational vehicle park.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said the Reno gaming market has suffered since 2008 through the combination of a weakened local economy and increased competition from neighboring Indian casinos in Northern California.

He said the "excess capacity in the Reno market" has been a "structural hurdle" in limiting Boomtown's long-term cash flow contribution to Pinnacle.

"We support management's decision to exit the laggard Reno market and focus its attention on opportunities that are likely to generate better returns for shareholders," Wieczynski said.

Macquarie Securities gaming analyst Chad Beynon said Pinnacle was doing the right thing for investors by selling non-core assets to improve the balance sheet.

The company is also trying to sell an undeveloped casino site in Atlantic City.

"The fact that there is now actually an agreement in place is a positive sign for the company," Beynon said. "We also think the price is attractive given that we had thought anything above $20 million would have been a good deal."

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871. Follow @howardstutz on Twitter.