After PNGI Deals, New Owners for Retama, Belterra

In a deal that will result in new owners for a pair of racetracks, track and casino owners Penn National Gaming (PNGI) and Pinnacle Entertainment announced Dec. 18 that PNGI will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8 billion. 

Pinnacle owns or operates 16 gaming properties, including Retama Park, near Selma, Texas. Pinnacle also owns Belterra Park near Cincinnati, Ohio, but that track will not be added to the PNGI portfolio. As part of Monday's deal, PNGI noted divestitures connected to the Pinnacle deal will see Boyd Gaming purchase Belterra Park, Belterra Casino Resort in Indiana, and two other Pinnacle gaming operations for a total of approximately $575 million in cash.

"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," said Pinnacle chairman and CEO Anthony Sanfilippo. "We look forward to working closely with Penn National and Boyd to seamlessly transition the Pinnacle businesses to their respective new owners."

The PNGI-Pinnacle transaction was 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, Penn National reports 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 run-rate cost synergies following integration, and is anticipated to be 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 PNGI CEO Timothy J. Wilmott.

"The combined company will benefit from enhanced scale, additional growth opportunities, and best-in-class operations; creating a more efficient integrated gaming company," he continued. "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." 

Under the terms of the agreement, 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 transaction reflects a 36% premium for Pinnacle shareholders based on Pinnacle's closing price of $21.86 and Penn National's closing price of $22.91 Oct. 4. 

The deal with Boyd Gaming is expected to close in the second half of 2018. With completion of the purchase, Boyd Gaming will add to its current 24 casinos and racinos, including Delta Downs Racetrack Casino & Hotel and Evangeline Downs.

"This transaction is a compelling opportunity to diversify and expand our nationwide portfolio into new markets at an attractive price," said Keith Smith, president and CEO of Boyd Gaming. "By adding these four high-quality, well-maintained assets to our portfolio, we will gain strong positions in three of the largest metropolitan areas in the Midwest. This transaction will expand our company's size and scale, grow our customer base, and further enhance our substantial free cash flow profile."