Station Casinos has acquired for the tribe two parcels just north of Madera on Highway 99; however, before things can progress, the US Department of the Interior must accept the land into federal trust on behalf of the tribe, the National Indian Gaming Commission must approve the partnership and a gaming compact still must be negotiated with the state. According to the seven-year agreement, Station will receive a management fee equal to 24% of the project's net income.

It is the company's fourth such partnership in the past 12 months. In January, Station Casinos entered into an agreement with the Mechoopda Indian Tribe of Chico Rancheria for a project to be located 10 miles southeast of Chico, CA; in November, the Station Casinos entered into a compact with the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians for a development in Allegan County, MI; and last April it came to an agreement with the Federated Indians of Graton Rancheria for a gaming and entertainment project north of the Bay Area in Sonoma County, CA.

Station Casinos is not the only gaming company looking to join forces with tribes. Last month, Caesars Entertainment inked its third such deal in recent months. The most recent was a preliminary deal with the Big Sandy Band of Western Mono Indians to develop and manage a $200-million casino on tribal land, also near Fresno. Caesars previously announced that it is negotiating development and management agreements with the Pauma-Yuima Band of Luiseno Mission Indians for a casino to be built on Pauma tribal lands in northern San Diego County, CA, as well as plans with the Saint Regis Mohawk Tribe for a $500-million casino resort in Sullivan County, NY.

For Caesars, it appears to be a defensive maneuver. A recent company earnings announcement blames the company's $84-million fourth quarter loss--quadruple what it lost in the fourth quarter of 2002--on $127 million in write-downs caused by "increased competition from Native American casinos." For the full year of 2003, Caesars Entertainment reported adjusted net income of $150 million on revenue of about $4.5 billion. That compares to 2002 adjusted net income of $161 million on revenue of $4.4 billion.

For Station Casinos, it appears part of the company's ongoing growth strategy. Although the company announced a fourth quarter loss of $8.7 million for the fourth quarter, which compares to a profit of $4.5 million in the same 2002 period, its full year results were 1.5 times better than it experienced in 2002. The company posted a profit of $44.3 million in 2003 on revenue of $925.5 million, which compares to 2002 profit of $17.9 million on revenue of $866.1 million.

Indeed, Shares of Station Casinos closed Friday at a new 52-week high of $40.70. The company's share price has risen more than 50% since Dec. 10, when its share price stood at $28.60. The share price is now well more than double its 52-week low of $17.80. Shares of Caesars, while also closing at a 52-week high Friday ($13.20) that is double its 52-week low ($6.55), only have risen 25% since Dec. 10, when shares closed at $10.56.

Instant Insights /

Station Casinos Gains Another Tribal Partner

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