When Las Vegas-based gaming company Pinnacle Entertainment Inc. (NYSE: PNK) more than doubles in size in 2013, thanks to its recent purchasing of Ameristar Casinos Inc. (Nasdaq: ASCA) for roughly $2.8 billion, it will help spotlight some major trends in the U.S. casino industry-a sector that's been among the slowest to rebound after the economic downturn.

The gaming industry has always been dependent on upswings in business cycles and discretionary spending. But cash-strapped consumers have generally shied away from many hotel and casino resorts in recent years, and subsequently, so have private equity firms.

That spurred strategic players such as Pinnacle to begin looking for growth in regions outside of the Las Vegas and Atlantic City, N.J. hotspots.

"I see the Pinnacle deal as an example of what's been at play in the gaming industry," says Adam Moses, a partner in the Los Angeles office of Milbank Tweed Hadley & McCloy. The acquisition of Ameristar's properties, Moses points out, complements Pinnacle's existing portfolio. Adding eight casino-resorts in several notable gaming markets, and across different states, shows how "there aren't that many regional mid-sized operators anymore."

The transaction, announced in December, expands Pinnacle's operations into St. Charles near St. Louis, Mo; Kansas City, Mo; Council Bluffs, Iowa; Black Hawk, Colo.; Vicksburg, Miss.; East Chicago, Ind.; and Jackpot, Nev.

That's a necessary move for Pinnacle, Moses says, should it want to compete with larger rivals, namely Penn National Gaming Inc. (Nasdaq: PENN).

"The gaming industry in the U.S. is not much of a growth industry anymore," he says. "At this point it's mature, so to drive numbers, they have to rely on economies of scale, rather than organic growth."And with more states likely to consider gaming expansion proposals in 2013 and beyond, Moses expects middle-market companies to set up casinos in other markets, including New York, Texas, Illinois and Florida.

The industry is still a far cry from its 2006 heyday, says Michael Paladino, senior director of gaming, lodging and leisure at Fitch Ratings. Recall the $17.1 billion sale of Harrah's Entertainment to private equity firms Apollo Management Group (NYSE: APO) and Texas Pacific Group. Deals that size, in any sector, have been rare. Significant improvements in U.S. gaming revenues are less likely to occur in 2013, he adds, citing data from a Dec. 17 Fitch Ratings report. However, casino balance sheets are expected to remain highly leveraged, as casino operators continue to take advantage of low interest rates to facilitate debt-funded M&A activity, Paladino explains.

Coming off a period where there was "very little activity going on," Moses explains, there's now more confidence among the strategic buyers.

"They weren't doing these deals three years ago," Moses says, citing Pinnacle's acquistion. "But now they're willing to roll the dice again."

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