UPDATE: Nomura Downgrades Pinnacle Entertainment to Neutral on FTC Vote
In a report published Thursday, Nomura analyst Louise Cheung downgraded Pinnacle Entertainment (NYSE: PNK) from Buy to Neutral, and lowered the price target from $23.00 to $21.00.
In the report, Nomura noted, “The FTC voted 4-0 to challenge PNK's proposed acquisition of Ameristar (ASCA) on anti-trust concerns over the St. Louis and Lake Charles markets. While the FTC challenge will prolong the process by at least 6 months, we believe the acquisition will close. The question is whether it would be ‘as-is' or with 2 less properties. We believe Lumière could be the most likely St. Louis property to be sold. Based on our analysis, its sale would not materially affect the value of the company. However, Lake Charles could remove ~$4/sh of value, so our conclusion is the present value of PNK would be worth no less than ~$19/share under this modified scenario. The FTC will be an overhang on the stock until there is clarity on the PI ruling. To reflect the increased risk, we assign a 50% probability that the acquisition will be completed ‘as-is' and a 50% probability of a modified deal, whereby PNK sells a property in each of the contested markets to settle with the FTC, which results in a $21 PT.”
Pinnacle Entertainment closed on Wednesday at $18.92.
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