Stock Monitor: Penn National Gaming Post Earnings Reporting
LONDON, UK / ACCESSWIRE / December 20, 2017 / Active-Investors issued a free report on Pinnacle Entertainment, Inc. (NASDAQ: PNK) ("Pinnacle"), which is readily accessible upon registration at www.active-investors.com/registration-sg/?symbol=PNK as the Company's latest news hit the wire. On December 18, 2017, leading players in the gaming entertainment industry, Pinnacle and Penn National Gaming Inc. (NASDAQ: PENN) ("Penn National"), declared that they have entered into a definitive agreement wherein Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8 billion. The acquisition would help enhance Penn National's status as North America's leading regional gaming operator. Sign up now for our free research reports at:
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Active-Investors.com is focused on giving you timely information and the inside line on companies that matter to you. This morning, Pinnacle Entertainment most recent news is on our radar and we have decided to include it on our blog post. Today's free coverage PNK and PENN are available at:
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Financial Terms of the Deal
- As per the agreement, Pinnacle's shareholders will get $20.00 in cash and 0.42 shares of Penn National's common stock for each Pinnacle share. This comes down to a total purchase price of $32.47 per Pinnacle share based on Penn National's closing price, as on December 15, 2017.
- This implies a premium of 36% for Pinnacle's shareholders based on Pinnacle's closing price of $21.86 and Penn National's closing price of $22.91, as on October 04, 2017.
- The Boards of Directors of both Companies have approved the transaction. However, the transaction is subject to the shareholders of both Companies, 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. Post which, it is expected to close in the second half of 2018.
- After the closing, Penn National's shareholders will hold 78% of the combined Company's outstanding shares, while Pinnacle's shareholders will hold the remaining 22%.
- Penn National expects the deal to be immediately accretive to free cash flow in the first year itself.
Strategic Benefits for Penn National
Increased Scale and Broader Geographic Diversification - The acquisition would position Penn National as North America's leading regional gaming operator. Post the acquisition, 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. As a result, the Company would gain from the broader, deeper base of properties, greater economies of scale, and increased purchasing power. Besides, it would also bring together two of the top customer loyalty programs in the industry and Penn National will be better positioned to drive play within its portfolio, particularly at Tropicana Las Vegas and M Resort.
Greater Growth Opportunities - The acquisition will leverage Penn National's portfolio of regional and destination gaming properties and social gaming platforms across Pinnacle's portfolio of complementary assets. Therefore, the combined Company would gain from additional promotional opportunities in online and social gaming. This, in turn, will provide an additional boost to property level performance.
Opportunity for Meaningful Synergies - Penn National has estimated that the transaction would generate approximately $100 million in annual run-rate cost synergies, led by the elimination of corporate overhead redundancies and improved property level efficiencies.
Immediately Accretive to Free Cash Flow - The acquisition is expected to be accretive to free cash flow per share in the first year itself. Besides, the increased free cash flow generation from the combined Companies would enhance Penn National's ability to de-lever its balance sheet, pursue strategic opportunities, and eventually return capital to shareholders. Pro-forma for the divestitures and synergies, the acquisition reflects a multiple of 6.6x LTM EBITDA.
Strategic Benefits for Pinnacle
Pinnacle owns and operates 16 gaming and entertainment facilities in 11 jurisdictions across the United States, through a team of 16,000 members. Pinnacle would benefit significantly from the acquisition.
The combination of Pinnacle and Penn National would produce a stronger, more efficient, larger-scale gaming entertainment platform driven by the individual accomplishments of both Companies, as well as the collective efforts of their team members, shareholders, and guests. Moreover, Pinnacle's shareholders will get immediate value in the form of cash consideration and participation in the longer-term growth of Penn National through the stock compensation.
Simultaneous Divestiture Plans
Apart from the transaction, Penn National has entered into a definitive agreement with Boyd, wherein Boyd has agreed to 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 approximately $575 million in cash. These divestitures are expected to occur immediately prior to, and are conditioned upon, the completion of the Pinnacle acquisition.
In this regard, Gaming and Leisure Properties, Inc. (NASDAQ: GLPI) ("GLPI"), the landlord for Penn National and Pinnacle under their respective master lease agreements, has entered into an agreement to amend the terms of the Pinnacle master lease to authorize the divestitures. The followings terms have been agreed upon:
- Penn National and GLPI will enter into a sale and leaseback of the real estate associated with Belterra Park and Plainridge Park Casino for nearly $315 million.
- Post the closing of the merger, the Companies have decided upon an annual fixed rent payment of $25 million for Plainridge Park Casino, and $13.9 million in incremental annual rent to adjust to market conditions.
- At closing, GLPI and Boyd will enter into a master lease agreement for the divestitures, post which, Boyd will lease the divested real property from GLPI.
- Penn National will assume the existing master lease and Pinnacle's existing lease for the Meadows Casino and Racetrack in Pennsylvania. However, Penn National's master lease with GLPI will not be affected by this transaction.
Financing for the Acquisition
- Penn National intends 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.
- For the new debt, it has received committed financing from BofA Merrill Lynch and Goldman Sachs Bank USA, subject to customary conditions.
- Penn National expects that the additional cash flow from the acquisition would help it repay the debt on an accelerated basis after closing.
Stock Performance Snapshot
December 19, 2017 - At Tuesday's closing bell, Pinnacle Entertainment's stock climbed 2.31%, ending the trading session at $31.91.
Volume traded for the day: 2.87 million shares, which was above the 3-month average volume of 667.72 thousand shares.
Stock performance in the last month – up 12.08%; previous three-month period – up 57.74%; past twelve-month period – up 120.07%; and year-to-date - up 120.07%
After yesterday's close, Pinnacle Entertainment's market cap was at $1.84 billion.
Price to Earnings (P/E) ratio was at 63.69.
The stock is part of the Services sector, categorized under the Resorts & Casinos industry.
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