Icahn Bets on Vegas

In a late Monday filing in a Miami bankruptcy court, an Icahn
affiliate made a $155 million stalking-horse bid -- an initial offer
for buying a bankrupt property -- on the partially completed
Fontainebleau Las Vegas. That topped by $10 million a previous bid from
Penn National Gaming (Nasdaq: PENN),
which had expressed the earliest and strongest interest in the Las
Vegas property. Other investors, including Penn National, can still
make offers through mid-January.

Investing or gambling?

Icahn's Las Vegas bid could be riskier than his move in New Jersey, where he led a group of investors in acquiring the bankrupt
Tropicana Casino and Resort in Atlantic City. State regulators approved
the deal in August, but it still needs a formal OK from a bankruptcy
court.

That casino is still operating, even though the New Jersey gambling market is debilitated and is being battered by competition
from new slot-machine opportunities in surrounding states. Meanwhile,
the Las Vegas casino, whose construction has halted, still needs an
estimated $1.5 billion for completion -- and Icahn would have to
contend with the recessionary environment in Vegas.

Companies with luxury casinos, such as Las Vegas Sands (NYSE: LVS) and Wynn Resorts (Nasdaq: WYNN), are still experiencing reduced revenue from their Las Vegas properties. December's opening of the giant CityCenter project by MGM Mirage (NYSE: MGM)
and its partner, an affiliate of Dubai World, will be the supreme test
of how much extra gambling, hotel, residential and retail capacity Las
Vegas can absorb.

Investors appeared to like the idea that Penn National, which has
avoided the Las Vegas Strip market, might be discouraged from entering
despite Chairman and CEO Peter Carlino's oft-expressed desire to invest in Vegas. The company's shares rose by about 1% in mid-afternoon trading on Tuesday.

Icahn's winning streak

Icahn has played
the Nevada gambling scene before -- and he has played it well. In 2008,
a company he controls sold one Strip casino, two Las Vegas-area
casinos, one casino in Laughlin, Nev., and some Las Vegas Strip land to
a real estate fund run by Goldman Sachs (NYSE: GS).
Having bought the Nevada properties between 1998 and 2006, Icahn sold
the casino properties for $1.2 billion, for a tidy after-tax gain of
$472 million.

Icahn also has scored in the New Jersey market. He bought one casino
for $65 million in a 2000 bankruptcy sale and eventually sold it to Pinnacle Entertainment (NYSE: PNK)
in 2006 for $270 million. Pinnacle imploded the casino and planned to
build a new one, but with the market's collapse, Pinnacle decided to
suspend development plans "indefinitely."

Today, Las Vegas' risks
seem as great as, if not greater than, its rewards. However, judging
from his casino ventures, we can safely say that Icahn knows when to
hold 'em and when to fold 'em.

© 2009 UCLICK L.L.C.