Tuesday, May 23, 2006

The end of the bidding war for Aztar may finally have arrived.
Kentucky-based Columbia Sussex Corp. topped its previous bid by $1 a share
late Monday and Aztar Corp. declared the $54 a share offer superior to the
company's signed merger agreement with Pinnacle Entertainment. The $2.97
billion all-cash deal -- which includes acquiring all outstanding shares of
Aztar stock, assuming the company's debt and converting bonds -- would allow
Columbia Sussex to buy the Tropicana casinos in Las Vegas and Atlantic City
and three small casinos in Laughlin, Indiana and Missouri, almost doubling
its casino portfolio. Las Vegas-based Pinnacle Entertainment has until late
Thursday to decide if it wants to match or exceed the Columbia offer. The
latest Aztar-Pinnacle merger agreement, signed May 5, calls for Pinnacle to
pay $51 a share in cash and stock for Aztar, or $2.64 billion.

If that deal collapses, Aztar has to pay Pinnacle a deal termination fee of
$52.2 million and pay up to $25.8 million of the company's legal expenses.

After Pinnacle's initial $2.1 billion agreement to purchase Aztar, 14
additional bids from four casino companies drove the price for Aztar almost
a $1 billion higher than the original deal. Aztar's stock price, which has
gained more than $20 in value since the beginning of March, also benefited
from the interest.

Gaming analysts said Tuesday that it seems to be a foregone conclusion that
Pinnacle, which started the back-and-forth bidding war March 13, will take
its breakup fees and look elsewhere along the Strip for a Las Vegas casino.

"We believe that ($54 a share) is more than a full price for Aztar and we
believe that Pinnacle should walk away with a $78 million breakup fee,"
Merrill Lynch gaming analyst David Anders said in a note to investors.

While buying the two Tropicana casinos would have given Pinnacle something
it lacks, a presence in Las Vegas and Atlantic City, the price "simply seems
to have gotten too rich," Davenport Equity Research analyst George Smith
said.

Morgan Joseph gaming analyst Adam Steinberg also thought Pinnacle is
finished bidding.

"I think so," Steinberg said. "They'll probably take the full three days,
but I'd be surprised to see another bid."

Privately held Columbia Sussex has four casinos in Nevada; the off-Strip
Westin, Caesars Tahoe and Horizon in Lake Tahoe and the River Palms in
Laughlin. The company entered the bidding war April 17. Last Wednesday, the
company offered $53 a share for Aztar, but Aztar's board of directors said
it wasn't ready to declare the bid superior to Pinnacle's last offer.

Sources familiar with the negotiating process said Columbia Sussex upped the
offer by $1 a share during discussions with the Aztar board.

In a statement, Columbia Sussex President and Chief Executive Officer Bill
Yung III discounted analysts' predictions that the company might have
trouble closing the Aztar purchase. Last year, the company dropped a bid to
buy the President Casino in St. Louis after several contentious meetings
with Missouri gaming regulators.

"We have a strong acquisition track record, having successfully closed 36
transactions in the last five years, including seven gaming acquisitions,"
Yung said. "And we are confident in our ability to obtain all necessary
approvals to close this acquisition in a timely fashion."

A company spokeswoman said Yung would not comment beyond the statement.

Columbia Sussex said it would work with Aztar to sell its riverboat casino
in Missouri to avoid any complications with that state's regulatory body.
The company, which has been licensed in Nevada, Louisiana and Mississippi,
said it expects to be licensed in New Jersey and Indiana.

As part of the merger agreement, Columbia Sussex deposited $313 million in a
bank account, payable to Aztar if the deal collapses.

Also, Columbia Sussex agreed to increase the purchase price to just less
than a penny a share if the transaction takes longer than six months to
close. If the deal takes longer than nine months to complete, the cost of
the transaction will increase to just less than 2 cents a share.

Aztar shares rose $1, or 1.95 percent, to close at $52.30 on the New York
Stock Exchange. More than 4 million shares were traded, about four times the
average daily volume. Pinnacle shares closed at $29.39, up $1.16 or 4.11
percent.