Nov. 23 (Bloomberg) -- Billionaire investor Carl Icahn will be the so-called stalking-horse bidder at the auction for bankrupt casino developer Fontainebleau Las Vegas LLC after Penn National Gaming Inc. dropped out of the bidding.

U.S. Bankruptcy Judge A. Jay Cristol in Miami today approved the procedures outlining the bid and auction process. The $156.5 million offer by Icahn Nevada Gaming Acquisition LLC will be the opening bid at the Jan. 21 auction.

Icahn triggered a bidding war in court today, leading to its so-called stalking-horse offer of $156.5 million; including $105 million in cash. Penn stopped bidding at $145 million, including $50 million in debtor-in-possession financing, after its initial offer of $101.5 million.

The 63-story Fontainebleau, about 70 percent complete at a cost of $2 billion when it filed for bankruptcy in June, sits on about 27 acres at the north end of the Las Vegas Strip. It will cost about $1.5 billion to finish, Penn has estimated.

Augusto Sasso, a financial adviser to Fontainebleau, told the court that he had conversations with about 17 potential bidders last week at the Gaming Convention in Las Vegas. Interested parties were from the “strategic gaming and entertainment, resort, real estate and financial” industries, Sasso said.

Icahn and Penn spokesman Joe Jaffoni declined to comment.

Fontainebleau Las Vegas LLC and affiliates Fontainebleau Las Vegas Holdings LLC and Fontainebleau Las Vegas Capital Corp. sought court protection from creditors June 9, listing assets and debt of more than $1 billion each.

Real estate developer Jeffrey Soffer was building Fontainebleau. Soffer and partner Dubai World own the Fontainebleau hotel in Miami, which isn’t involved in the Las Vegas development’s bankruptcy.

Penn fell 7 cents to $27.56 in Nasdaq Stock Market trading. The shares have gained 29 percent this year.

The case is In Re Fontainebleau Las Vegas LLC, 09-21482, U.S. Bankruptcy Court, Southern District of Florida (Miami).

To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net.

Last Updated: November 23, 2009 19:16 EST