Penn National Gaming announced Monday that it has agreed to acquire Pinnacle Entertainment for $2.8 billion in combined cash and stock. Pinnacle shareholders will receive $20 per share of Pinnacle plus 0.42 shares of Penn National stock for each Pinnacle share they own. The implied price per share is $32.47, a 36 premium for Pinnacle based on the company’s closing price on October 4th.
Penn National CEO Timothy Wilmott did some of the usual corporate cheerleading-speak in a press release:
The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company. Going forward, we will have the financial and operational flexibility to further execute on our strategic objectives, while maintaining our track record of industry-leading profit margins and generating significant cash flow to reduce leverage over time. We look forward to welcoming Pinnacle’s talented employees to our team and to further enhancing our status as North America’s leading regional gaming operator.
Anthony Sanfilippo, Chariman and CEO of Pinnacle, also had some things to say:
Pinnacle shareholders will receive immediate value from the cash consideration, as well as participation in the longer-term growth of Penn National that we expect will occur from the integration of two great companies into a more efficient, larger-scale gaming entertainment platform. We are also pleased that Boyd Gaming will be acquiring our Ameristar properties in St. Charles and Kansas City, along with Belterra Casino Resort and Belterra Park. We look forward to working closely with Penn National and Boyd to seamlessly transition the Pinnacle businesses to their respective new owners.
As Sanfilippo mentioned, Boyd Gaming – mostly notable the owner of the Orleans, Gold Coast, and Fremont casinos in Las Vegas – is buying four of Pinnacle’s casinos in the deal. The purchase will be made from Penn National after the initial acquisition is completed. Boyd Gaming will pay $575 million in cash for the properties.
Both Penn National and Pinnacle Entertainment are “regional” gaming companies, focusing on smaller casinos, mostly in places other than Las Vegas and Atlantic City. That doesn’t mean none of their properties are in gaming hotbeds. Penn National owns the Tropicana in Las Vegas as well as the M Resort in Henderson, Nevada. Its casinos mostly concentrate in Mississippi and the Midwest; Hollywood Casino is one of Penn National’s main brands.
Going into the deal, Pinnacle owned sixteen casino properties in the U.S., though of course four of those will be going to Boyd Gaming. Pinnacle also focuses on the Midwest, Mississippi, and Louisiana. It is (was, I guess) the owner of the Ameristar casino chain.
The boards of both companies have already approved the deal, but it still needs approval from shareholders and gaming authorities. Assuming all goes as planned, the transaction is expected to close in the second half of 2018.