Station Casinos expanding with second KC casino

Station Casinos Inc. of Las Vegas announced today it will buy the Flamingo Hilton Riverboat Casino in Kansas City for $22.5 million.

Atlantic City casino mogul Donald Trump had seen the casino as an entryway into the booming Kansas City market, and had signed a deal in January to purchase it for $15 million. But Trump bogged down in the Missouri licensing approval process, and Hilton Hotels Corp. and Park Place Entertainment Inc. began quietly soliciting other offers for the property after the Aug. 31 deadline on the Trump deal expired.

Station, meanwhile, jumped immediately after the Trump deal fell through, and negotiated a purchase agreement in less than two weeks. It will be Station's second property in Kansas City, joining Station Casino Kansas City. The company expects the acquisition to be accretive to earnings in 2000.

"Obviously, we're very familiar with the property, competing with it every day, so when the property became available, we took advantage of it," said Glenn Christenson, executive vice president and chief financial officer of Station. "With the improvements in our capital structure over the last 12 months, we're able to move on these kinds of opportunities in a very short period of time."

Christenson said the acquisition will give Station a nearly 50 percent market share in Kansas City.

"It allows us to duplicate our very successful Las Vegas locals' strategy in Kansas City," he said. "We'll have significantly more geographic distribution in that market, and be able to take advantage of economies of scale in that market, such as advertising and purchasing."

Station was willing to top Trump's earlier bid by $7.5 million because of strengthening cash flow at the property, Christenson said. When Trump announced the deal to acquire the property in January, the property's cash flow over the previous 12 months was negative. Today, the previous 12 months' cash flow is $4.5 million.

Station plans to invest about $10 million in improving the property, Christenson said. The company hasn't decided yet if it will rename the casino.

The property was one of the last retained by Hilton following that company's spinoff of its gaming properties to Las Vegas-based Park Place last year. Hilton had been accused of bribing a Kansas City official for his support to build the property, and agreed to sell the property quickly to Trump to avoid a licensing investigation on those allegations.

The deal had called for Hilton to surrender its license in Missouri, and for Trump Hotels & Casino Resorts to obtain a new license for the property. But the approval process bogged down before the Missouri Gaming Commission, as commissioners became concerned with Trump's previous bankruptcy and current high debt levels, according to the Kansas City Star. Park Place, which was handling the deal for Hilton, then began shopping the property for other buyers.

Christenson said Station's deal hinges on its being able to receive a license for the casino, as well as approval under federal antitrust regulations.

"The (Missouri) commission is extremely familiar with our company, and there's no reason to believe we couldn't get a license in the very near term," Christenson said. "Our expectation is that we will be licensed before the end of the year."

Station owns four casinos in the Las Vegas Valley -- Palace Station, Boulder Station, Sunset Station and Texas Station. It also owns Station Casino St. Charles, located near St. Louis.

"We will continue to take advantage of (acquisition) opportunities as they become available," Christenson said. "Ninety percent of our focus is on the Las Vegas locals market, and we want to continue to maintain our leadership role here. But this was a unique opportunity in a market we already operate in."

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