Penn National to Acquire Pinnacle for $2.8 Billion in Largest Gaming Merger Since 2013
Penn National to Acquire Pinnacle for .8 Billion in Largest Gaming Merger Since 2013
Cash-and-Stock Deal Positions Penn National as Largest US Gaming Operator by Properties
Las Vegas-based Pinnacle owns 16 casinos, mostly in the Midwest and South, including properties that became part of its portfolio after a 2013 deal to acquire Ameristar Casinos for nearly $3 billion. Penn National has 29 properties in states such as California, Ohio, Massachusetts, New Jersey and Nevada.
Penn National will allow Boyd Gaming Corp. to buy four Pinnacle properties, including Belterra Casino Resort in Indiana; Belterra Park Gaming and Horse Racing in Cincinnati, OH; and properties in St. Charles and Kansas City, MO; for $575 million.
The transaction, subject to approval of the shareholders of both companies and applicable gaming authorities and other regulatory and customary closing conditions, is expected to close in the second half of 2018.
After the transaction closes, Penn National will be the largest U.S. gaming company based on properties, operating 41 hotel and casino assets in 20 markets throughout North America with approximately 53,500 slots, 1,300 tables, 8,300 hotel rooms and more than 35,000 employees.
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 Dec. 15 closing price.
“The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company,” said Timothy J. Wilmott, CEO of Penn National Gaming, in a statement. “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.”
Despite the inherent benefits, however, Moody’s Investors Service on Tuesday placed the ratings of both companies on review for downgrade following the announced acquisition citing concerns about the debt level of the combined company following the deal.
Moody’s said its review will focus on Penn National’s willingness and ability to reduce post-acquisition leverage and weigh this against the favorable longer-term credit benefits related to increased size, diversification, and economies of scale as a result of the transaction.