Penn National buying Meadows Casino operator Pinnacle for $2.8B
Penn National Gaming Inc. said it is acquiring Las Vegas-based Pinnacle Entertainment Inc., the company that operates The Meadows Racetrack & Casino and 15 other casino properties in the Midwest and Southeast.
Wyomissing-based Penn National said Dec. 18 the deal is valued at $2.8 billion in a cash and stock transaction. The two sides were in merger discussions since October.
The deal, which was approved by the boards of both companies, is expected to close in the second half of 2018. The combination will create an expanded gaming platform for Penn National, already a leading regional casino owner.
Pinnacle owns and operates 16 gaming and entertainment properties in 11 jurisdictions across the United States. According to a press release, following the acquisition of Pinnacle and the planned divestiture of four of its properties to Las Vegas-based Boyd Gaming Corp., Penn National said it will have significantly greater operational and geographic diversity and operate a combined 41 properties in 20 jurisdictions throughout North America.
The transaction is expected to generate $100 million in annual cost synergies following integration and is anticipated to be immediately accretive to free cash flow in the first year.
“By combining our highly complementary portfolios and similar operating philosophies, we will be able to leverage the strengths of both our companies and create an unparalleled experience for our regional gaming customers, while generating significant value for our shareholders and business partners,” said Penn National Chief Executive Officer Timothy J. Wilmott. “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.”
Pinnacle has 16,000 employees at the 16 casinos it operates, including 1,300 at The Meadows, which it has operated since September 2015, after previous Meadows owner Cannery Casino Resorts sold the property to Gaming and Leisure Properties Inc. for $440 million. Under its operating agreement, Pinnacle leases the property from GLPI, which is the landlord for both Penn National and Pinnacle.
The combined company will operate 41 properties across 20 jurisdictions with approximately 53,500 slots, 1,300 tables and 8,300 hotel rooms, and will have more than 35,000 employees.
Penn National noted by combining two of the top customer loyalty programs in the industry, it will be better positioned to drive play within its portfolio, in particular at Tropicana Las Vegas and M Resort, also in Las Vegas.
In connection with the transaction, Boyd will purchase Pinnacle’s gaming operations at Ameristar Kansas City and Ameristar St. Charles in Missouri; Belterra Casino Resort in Indiana; and Belterra Park in Ohio for $575 million. The divestitures will occur immediately prior to the completion of the Pinnacle acquisition.
Penn National and GLPI will enter into a sale and leaseback of the real estate associated with Belterra Park and Plainridge Park Casino for approximately $315 million.
At closing, GLPI and Boyd will enter into a master lease agreement for the divestitures pursuant to which Boyd will lease the divested property from GLPI.
Penn National will assume the existing master lease and Pinnacle’s existing lease for the Meadows Racetrack & Casino in Pennsylvania.
The Meadows, one of the largest casinos on the East Coast, attracts about 5 million guests annually.
During a presentation to members of the Washington County Chamber of Commerce in late October, General Manager Allie Evangelista said for 2018, the casino would spend $1.1 million on 50 additional slot machines and had a goal of spending between $5 million and $9 million to upgrade its food and beverage service. The casino was also looking to add to its list of musical acts for its 2018 summer concert program.
Under the terms of the $2.8 billion merger agreement announced Monday, Pinnacle shareholders will receive $20 in cash and 0.42 shares of Penn National common stock for each Pinnacle share, which implies a total purchase price of $32.47 per Pinnacle share based on Penn National’s closing price Friday.