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Boyd Gaming Corp Disappointed Over Vegas Casino Performance

Boyd Gaming Corp. said Tuesday that it was disappointed in the performance of its newest Las Vegas casino and it will sell the seven-month-old South Coast property to Michael Gaughan, the founder of the Coast Casinos chain it merged with two years ago.

Boyd's announcement of the sale of the 600-room South Coast Hotel and Casino came less than a year it opened in December at a cost of about $583 million. The property five miles south of the Las Vegas Strip has attempted to cater to horse lovers with its 1,200-stall equestrian center.

"I think there's concern that, from early indications, that the market growth is slowing," said analyst Matthew Jacob of Majestic Research.

The announcement, combined with Boyd's 79 percent drop in second-quarter net income and less-than-expected profits from chief rival Station Casinos Inc., stoked analysts' fears of weakening demand for gambling among Las Vegas residents.

Revenue at the property suffered from "continued softness," the company said.

Gaughan agreed to pay Boyd an amount equal to the net proceeds from the sale of 15.8 million Boyd shares, divesting him of his entire 17.7 percent stake in Boyd. At Tuesday's closing price of $36.49, those shares were worth $576.5 million.

"If you go by what the place cost to build, I'm getting a good deal. If you go by the (operating profit), Boyd's getting a good deal," Gaughan, 63, said. He said he expected the property to turn an operating profit of about $40 million for the year.

Boyd said second-quarter profit tumbled 79 percent to $10.2 million, or 11 cents per share, on higher pre-opening expenses and write downs related to the retirement of one of its original gambling boats. Las Vegas-base Boyd Gaming operates 19 casino entertainment properties in six states and jointly owns the Borgata in Atlantic City, NJ.