The merger man: Sanfilippo drew on experience in deal for Ameristar

Pinnacle Entertainment CEO Anthony Sanfilippo drew upon his experience in corporate mergers in overseeing his company’s $2.8 billion acquisition of rival Ameristar Casinos in 2013.

In the six months since the buyout’s completion, Pinnacle has become a new company under its old name.

Las Vegas-based Pinnacle doubled its size. The company controls 14 casinos in nine states and is a regional gaming giant with more than $2.4 billion in annual revenue. Pinnacle operates 848,000 square feet of combined casino space with 511 table games and more than 21,000 slot machines. Pinnacle’s 13 hotels house 4,332 rooms.

The company also employs more than 15,000 people.

Pinnacle has three reporting regions — South, Midwest and West.

Although many states have reported weak gaming revenue figures in recent months, analysts view Pinnacle as one of the safe bets in the challenged regional gaming market.

Union Gaming Group analyst Robert Shore said in a January report to investors that Pinnacle’s operational expertise, free cash flow and cost savings of $26 million annually following the Ameristar merger give the company the tools to weather any economic turbulence.

“There is further opportunity for property- level margin improvement, systemwide revenue drivers and additional cost synergies,” Shore told investors. “The longer-term story is promising as the cost structure of regional assets has been streamlined and any future top-line gains will essentially translate directly into cash flow.”

Last week, Pinnacle exceeded market expectations when it announced a 77 percent increase in fourth-quarter revenues — its first full quarter including the Ameristar properties.

Macquarie Securities gaming analyst Chad Beynon said the market has “misvalued” Pinnacle.

“It remains our top pick in regional gaming,” Beynon said, citing a strong casino portfolio that outperformed the market.

Some of Pinnacle’s biggest changes from the merger came in Las Vegas. Pinnacle doesn’t operate a casino in its hometown, but it maintains a presence.

In January, the company took over a five-story, 86,000-square-foot office tower in The HC | Hughes Center on Paradise Road. Pinnacle will eventually employ 320 people in the corporate offices, paying more than $25 million in salary and benefits.

A tour of the offices finds both longtime Pinnacle employees and former Ameristar personnel sharing space.

For example, a corner office with spacious views to the south houses four marketing specialists. The workers transferred from Ameristar and are responsible for all of the combined company’s properties.

“Everyone works on the whole portfolio,” said Sanfilippo, who became Pinnacle’s CEO in March 2010. “There were some things we thought Ameristar did well. We outsourced our marketing functions but decided to bring everything in house.”

THE KEYS TO A SUCCESSFUL MERGER

Pinnacle has become a gaming industry case study in blending two different companies.

Sanfilippo said there were two keys to the integration. One was that the companies had similar corporate cultures. The other was communication. Ameristar allowed the Sanfilippo and his team to tour the eight properties they were buying and meet with employees multiple times.

He’s had experience integrating casinos after mergers. In 2003, Sanfilippo helped incorporate the three Horseshoe Gaming casinos into Harrah’s Entertainment following a $1.4 billion buyout. Two years later, Sanfilippo played a similar role in merging casinos into the company when Harrah’s bought Caesars Entertainment Inc. for $9 billion, the largest gaming industry merger in history.

During the Pinnacle-Ameristar merger, the buying company worked to mitigate the worries of skittish employees, who were involved in just the second major gaming buyout since the recession hit. Two years earlier, Boyd Gaming Corp. bought regional company Peninsula Gaming for $1.45 billion.

“We interviewed all employees and we selected the best individual who was the best fit in the new, larger company,” Sanfilippo said.

Pinnacle also decided to not eliminate the Ameristar name from casinos. Pinnacle already operates properties under different brand names — such as Boomtown, L’Auberge and Belterra.

“The Ameristar name has a loyal following,” Sanfilippo said. “We’re not rebranding any properties because we saw no reason to change the names.”

By April, Pinnacle plans to announce a new player loyalty program and rewards card that ties all 14 casinos together.

To satisfy Federal Trade Commission concerns, Pinnacle had to sell two assets in markets where the company could be viewed as holding a monopoly. The under-construction Ameristar casino in Lake Charles, La., was sold to Golden Nugget while Tropicana Entertainment bought Pinnacle’s Lumiere Place in St. Louis.

Shortly after Jan. 1, Pinnacle unveiled a new corporate logo to its employees to give the company a fresh start following the merger.

“We’re very happy with the corporate culture that we’ve been creating,” Sanfilippo said.

FOCUSED ON EXPANSION

The new corporate headquarters are a work in progress. Walls and public areas still need decorating. And the company is filling several positions left vacant by the buyout.

But don’t call it a corporate headquarters.

Sanfilippo has christened the location the company’s “Las Vegas service center,” providing all the necessary backup support to casinos throughout the company.

“Publicly, we have been treating Pinnacle like a new company,” Sanfilippo said.

Pinnacle encourages its casinos to participate in their local communities and get involved in charitable efforts. The same holds true for the corporate offices. Sanfilippo said Pinnacle plans to work with the Cleveland Clinic Lou Ruvo Center for Brain Health as a charitable partner.

With the merger complete, Pinnacle is focused on completing its two expansion projects.

In May, Pinnacle will open the newly christened Belterra Park Gaming and Race Track near Cincinnati. Construction is adding a 1,500-machine video lottery terminal casino with six restaurants to the thoroughbred horse-racing facility.

In July, Pinnacle is opening a 150-room hotel and conference space at Boomtown New Orleans.

As for “What’s next?” Sanfilippo isn’t tipping his hand.

“We have enough here to keep us busy,” he said.

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

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