Gaming Giants Swapping Louisiana Properties

As part of the plan, Pinnacle will acquire the Lake Charles gaming assets for two Harrah's subsidiaries, owners of a pair of casino boats as well as related permits and licenses and the 263-room Harrah's Lake Charles Hotel at 505 N Lakeshore Dr. In turn, Harrah's will take over Pinnacle's 378-room Casino Magic Biloxi at 195 Beach Blvd., related assets and pick up an additional $25 million in cash.

Though Pinnacle and Harrah's did not return calls, experts familiar with the Gulf Coast gaming arena say the trade will benefit both parties on several levels. "Basically, Harrah's has decided to leave Lake Charles and concentrate on Biloxi while Pinnacle is doing well in Lake Charles already," Paul West, a partner with McGlinchey Stafford's Baton Rouge office, tells GlobeSt.com. "This is a deal that'll work out well for both of them."

Another added factor, West speculates, is Lake Charles Mayor Randy Roach has shown interest in moving a casino boat Downtown and using it as a potential anchor tenant for future development. "I wouldn't be surprised if he was leaning on Pinnacle to move one of its boats there to do just that," he adds.

Meanwhile with both land-based casinos out of commission from last season's hurricanes, the deal puts less strain on Pinnacle's capital resources. "The Casino Magic has to be completely rebuilt," William Thompson, a professor of public administration and a specialist in gambling regulation and trends with the University of Nevada/Las Vegas, "and for Pinnacle, this swap involves less capital investment than rebuilding of the Casino Magic demands."

Thompson tells GlobeSt.com that with Pinnacle wanting to invest in Missouri, the company might not want to put its capital into repairing a severely damaged hotel in Biloxi. "In Lake Charles, Pinnacle can operate something that's already in existence," he says. "They can put their start-up energy into Missouri."

Harrah's, in the meantime, gets some money out of the deal and a deeper market penetration in Biloxi, where it already has a presence. "Harrah's loves the middle market and does well with it," Thompson says. "It's a perfect location for them."

West says Pinnacle will still hold one of Harrah's licenses after the deal closes, but it's not certain what the company will do with it. "There's some talk about them bringing a boat to Baton Rouge or West Baton Rouge, but I'm not sure how far they've gotten with that," he says.