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Illinois Gaming Board Approves Penn National Gaming´s Pending Acquisition of Pinnacle Entertainment
Monday 16 April 2018

16 April 2018 - The Illinois Gaming Board approved the proposed financing for US-based casino operator Penn National Gaming, Inc.'s (PENN: NASDAQ) pending acquisition of Pinnacle Entertainment, Inc. (NASDAQ: PNK), subject to customary conditions, Penn said.

Completion of the proposed transaction is contingent on receipt of additional regulatory approvals, as well as certain other conditions.

Last month, the Pennsylvania Gaming Control Board and the West Virginia Lottery Commission conditionally approved the company's pending acquisition of Pinnacle Entertainment.

In addition, on March 29, shareholders of Penn National approved the issuance of common stock to Pinnacle stockholders in connection with the pending transaction and Pinnacle shareholders voted to adopt the merger agreement for the transaction.

Last December, Penn National Gaming and Pinnacle Entertainment entered into a definitive agreement under which Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately USD 2.8bn.

Under the terms of the agreement, Pinnacle shareholders will receive USD 20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share, which implies a total purchase price of USD 32.47 per Pinnacle share based on Penn National's closing price on December 15, 2017.

The transaction reflects a 36% premium for Pinnacle shareholders based on Pinnacle's closing price of USD 21.86 and Penn National's closing price of USD 22.91 on October 4, 2017.

THis transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2018.

Pinnacle owns and operates 16 gaming and entertainment facilities in 11 jurisdictions across the United States.

Following the acquisition of Pinnacle and the planned divestiture of four of its properties to Boyd Gaming Corp. (NYSE: BYD), Penn National 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 USD 100m in annual run-rate cost synergies following integration and is anticipated to be immediately accretive to free cash flow in the first year.

Pro forma for the divestitures and synergies, the acquisition reflects a multiple of 6.6x LTM EBITDA.

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.

In addition, by combining two of the top customer loyalty programmes in the industry, Penn National will be better positioned to drive play within its portfolio, in particular at Tropicana Las Vegas and M Resort.

Penn National expects the acquisition of Pinnacle to be immediately accretive to free cash flow per share in the first year.

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 USD 315m.

An amendment to the terms of the Pinnacle master lease following closing of the merger to reflect an annual fixed rent payment of USD 25m for Plainridge Park Casino and USD 13.9m in incremental annual rent to adjust to market conditions.

At closing, GLPI and Boyd will enter into a master lease agreement for the divestitures pursuant to which Boyd will lease the divested real property from GLPI (including the real property underlying Belterra Park).

Penn National will assume the existing master lease and Pinnacle's existing lease for the Meadows Casino and Racetrack in Pennsylvania. Penn National's master lease with GLPI will not be affected by this transaction.

The company said it has received committed financing for the transaction, subject to customary conditions, from BofA Merrill Lynch and Goldman Sachs Bank USA, and expects to fund the acquisition with a combination of the proceeds from the Boyd and GLPI transactions, existing cash on its balance sheet and new debt financing.

Penn National anticipates that the additional cash flow resulting from the acquisition will allow it to pay down debt on an accelerated basis after closing.

THis transaction is subject to approval of the shareholders of Penn National and Pinnacle, the approval of applicable gaming authorities, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act and other customary closing conditions.

The companies expect the transaction to close in the second half of 2018.

Upon completion of the transaction Penn National and Pinnacle shareholders will hold 78 % and 22 %, respectively, of the combined company's outstanding shares.

Goldman, Sachs and Co. LLC is acting as lead financial advisor, BofA Merrill Lynch is also acting as a financial advisor, and Wachtell, Lipton, Rosen and Katz is acting as legal advisor to Penn National in connection with the transaction. J.P. Morgan is acting as financial advisor and Skadden, Arps, Slate, Meagher and Flom LLP is acting as legal advisor to Pinnacle in connection with the transaction.
Details
Date Published: 16/04/2018
Target: Pinnacle Entertainment
Country: USA
Deal Size: 2.8bn (USD)
Sector: Hotels/Restaurants/Casinos/Catering
Type: Corporate acquisition
Financing: Cash and Stock
Status: Agreed
Vendor:
Buyer: Penn National Gaming
Buyer Advisor: Goldman, Sachs and Co , BofA Merrill Lynch , Wachtell, Lipton, Rosen and Katz
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