Boyd Gaming (BYD) may be the next target in the buyout wave sweeping Las Vegas. On Oct. 25, Harrah's (HET) Entertainment, featured in this column on May 29, got a $15 billion bid from Texas Pacific Group and Apollo Management. Earlier, casino owner Aztar (AZR) was bought out after a four-way bidding war. "This time, it is Boyd, which owns and operates casinos in Nevada and four other states, that may be taken private," says Lawrence Haverty of Gabelli Global Multimedia Trust (GGT). He identified Harrah's, Aztar, and media giant Tribune (TRB) months before they became targets. Like them, Boyd owns valuable assets that are way underpriced, says Haverty, who puts its "private-market value" at 70 a share. The stock is now at 42.11, and Chairman William Boyd owns a 30% stake. Boyd's big attraction is its real estate in Vegas, Haverty says. It also owns 50% of the Borgata Hotel Casino & Spa in Atlantic City with MGM Mirage (MGM). Major operators such as Steve Wynn or deal-hungry private equity groups could go after Boyd, says Haverty. But he says the most "fascinating player" who may make a bid is Carl Icahn, who already owns the Stratosphere and "is still trying to get a major foothold in Vegas." Icahn knows the value of land in Vegas, he adds. Lawrence Klatzkin of Jefferies (JEF), who rates Boyd a "buy," notes that it is down 35% since its peak in April, but its "long-term potential hasn't changed." One big project is the $4 billion Echelon Place casino at the north end of the Strip, scheduled to open in early 2010. Boyd declined comment on any speculation.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial