Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Pinnacle Entertainment, Inc (PNK), Ameristar Casinos, Inc. (ASCA): Merger Offers Synergies and Profit Potential

Complications and Potential Issues

It should be noted that this transaction is not yet a done deal. Although the Nevada Gaming Commission’s approval was certainly the most important hurdle, the merger is still under Federal Trade Commission review. Additionally, gaming commissioners in Iowa, Indiana, Louisiana and Mississippi will need to give the deal their blessing. Rejections from any of these state entities could force the companies to sell off properties in the affected areas before consummating the deal. However, this currently seems unlikely.

Ways to Profit

It is unfortunate that this deal currently offers little in the way of an arbitrage profit. However, keen-eyed investors can still make it worth their while. Those who believe that regulatory approval is not assured may wish to remain on the sidelines until a news-related event drives down Ameristar’s price. Those who wish to be particularly aggressive could even open a short position in Ameristar on the expectation that the deal will fail. However, this may present too much risk for any but the most cavalier traders.

Alternatively, a long position in Pinnacle may prove to be judicious over the long term. Since news of the deal broke, the company’s stock has been on an unprecedented tear. After a period of consolidation, it could well resume its upward climb. In addition, the predicted synergies that this deal will create could produce long-term value in the combined company’s stock.

In sum, this deal provides opportunities for short-term traders and long-term investors alike. Despite its lack of an arbitrage trade, it promises to create synergies that could improve the combined company’s balance sheet and create long-term value. However, investors should remember that the merger still requires action from several regulatory bodies. In this heavily regulated industry, merger-related celebrations often turn out to be premature.

The Motley Fool’s chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: “The Motley Fool’s Top Stock for 2013.” Just click here to access the report and find out the name of this under-the-radar company.

The article Merger Offers Synergies and Profit Potential originally appeared on and is written by Mike Thiessen.

Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.