Boyd Retracts Interest in Station

Boyd Gaming BYD has announced that it is no longer interested in the assets of casino operator Station Casinos. We are leaving our fair value estimate intact. Boyd had been interested in Station, which operates properties that cater to the Las Vegas locals market, for a year and a half as Station fell into financial trouble and eventually bankruptcy. The potential acquiree, however, rejected Boyd's offers and included provisions in the bidding process that placed outside suitors at a disadvantage relative to Station insiders, including a put option that forced external buyers to purchase currently leased land under properties, Station's ability to transfer items like customer lists and IT infrastructure, and the right to hire away employees before the sale. Although the acquisition would have bolstered Boyd's positioning in the Las Vegas locals segment, we view this as a positive sign that management will not make any acquisitions at too high a price. Additionally, the region continues to struggle in a tough economic environment, which probably has changed the return profile of the assets.