Two gambling companies, which together own four of the St. Louis area’s six casinos, are negotiating a possible merger.
Penn National Gaming Inc., which runs the Hollywood Casino in Maryland Heights and Casino Argosy Alton, said Thursday it is discussing acquiring Pinnacle Entertainment Inc., the operator of Ameristar Casino in St. Charles and River City Casino in Lemay.
Pennsylvania-based Penn National and Pinnacle, with headquarters in Las Vegas, said the talks toward a cash-and-stock deal may or may not lead to a transaction.
Pinnacle owns and operates 16 gaming properties overall, while Penn National has 29. In the St. Louis area, Ameristar St. Charles is the biggest casino, based on receipts.
Regulators, however, potentially could order the consolidated company to sell off some of its casinos in the St. Louis area and elsewhere to preserve market competition.
Of the St. Louis area properties affected by the negotiations, Ameristar St. Charles and Hollywood Casino are the most direct competitors. They’re situated about a mile apart on the west and east sides of the Missouri River near Interstate 70.
The Missouri Gaming Commission and the Illinois Gaming Board would have to approve any transfer of control of any casino in their jurisdictions.
Missouri regulations require its commission, among other things, to conclude that a license transfer “would have no material negative competitive impact.”
The Illinois board must consider “the impact of any economic concentration” of ownership or control, according to Illinois regulations.
Daniel Holmes, a gaming analyst, said a sell-off requirement is more likely in Missouri.
In addition to running three of the four casinos in the Missouri portion of metro St. Louis, he noted, the consolidated company also would be in charge of two on the Missouri side of metro Kansas City. That would add up to five of 13 casinos statewide, he said.
“Many would speculate that the state (commission) would have a concern of having so many casinos owned by the same operator,” said Holmes, the national gaming practice leader for RubinBrown LLP.
That, Holmes said, could be viewed as affecting the “future viability” of gaming in the state.
Meanwhile, there’s a precedent for federal regulators to step in to preserve competition in the local market.
Antitrust regulators with the Federal Trade Commission intervened when Pinnacle announced in 2013 a $2.8 billion deal to acquire then-rival Ameristar Casinos.
The FTC ordered Pinnacle to sell either Lumière in downtown St. Louis or River City. Pinnacle ended up selling Lumière to Tropicana Entertainment, a company controlled by billionaire Carl Icahn.
Asked whether the current FTC under President Donald Trump, a former New Jersey casino owner, would be as likely to intervene now, Holmes declined to make a prediction.
Penn National entered the St. Louis market in 2005 when it bought the Alton Argosy, the area’s oldest casino. In 2012, the company acquired what was then the Harrah’s casino in Maryland Heights from Caesars Entertainment.
Holmes said the Penn National-Pinnacle negotiations are part of what has been a significant trend of consolidation in the gaming industry. He said such deals provide economies of scale and can result in reduced administrative and overhead costs.
However, he said he didn’t believe the consolidation of ownership could lead to any Missouri casinos closing.
“St. Louis and Kansas City still have a strong business climate for the existing casinos,” he said. “It’s not getting to the point where it’s oversaturated.”
Reuters and The Associated Press contributed to this report.