Pinnacle Entertainment Inc., the owner of seven US casinos, agreed to pay $95 million for a 26 percent stake in a Harbinger Capital Partners LLC-backed developer of two casino resorts in Vietnam.
Pinnacle will also manage a beachfront casino resort planned by the developer, Asian Coast Development (Canada) Ltd., about 80 miles (129 kilometers) southeast of Ho Chi Minh City, Vietnam's largest city, according to a statement Thursday from the Las Vegas-based company.
The transaction represents Pinnacle's first venture into Asia under Chief Executive Officer Anthony Sanfilippo, who joined the company in March 2010. Philip Falcone, whose New York-based Harbinger Capital is the largest shareholder in Asian Coast, wants Vietnam to mimic the success of Macau, China, and Singapore with integrated resorts that include casinos.
"It is a measured way for us to enter the Asian gaming market," Sanfilippo said Thursday on a conference call, adding that talks began last summer. "We believe the potential return is significant."
The casino to be managed by Pinnacle will be the second built by Asian Coast on the Ho Tram Strip, and will open after a casino resort that MGM Resorts International will manage.
$4.2 billion strip
Asian Coast CEO Lloyd Nathan expects to open the MGM Grand Ho Tran in 2013, managed by MGM Hospitality, in the first phase of the planned $4.2 billion Ho Tram Strip. That corridor will have five resorts, including two with casinos, on 420 acres (170 hectares) along 2.2 kilometers of beaches overlooking the South China Sea. The plan also includes residential areas, with Asian Coast being the government-approved developer.
Currently, only foreign passport holders can gamble in Vietnam, meaning the resorts will primarily cater to about 5 million tourists who visit the country annually.
"While this morning's announcement came as a bit of a surprise to us, we believe the ACDL deal presents compelling return prospects for Pinnacle's modest $95 million investment," Steven Wieczynski, an analyst at Stifel Nicolaus Capital Markets, said in a note to investors. "Management could use its Ho Tram Strip management agreement to test the waters in Asia."
Pinnacle fell 19 cents to $14.47 at 11:49 a.m. in New York Stock Exchange composite trading.