Accretive Transaction Creates North
America’s Largest and Most Diversified Regional Gaming
Operator
Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National” or
the “Company”) announced today that it completed its previously
announced acquisition of Pinnacle Entertainment, Inc. (PNK: Nasdaq)
(“Pinnacle”) as well as the related divestitures to Boyd Gaming
Corporation (BYD: NYSE) (“Boyd”) and the real estate transactions
with Gaming and Leisure Properties, Inc. (GLPI: Nasdaq)
(“GLPI”).
The transaction further enhances Penn National’s position as
North America’s leading regional gaming operator, with 40
facilities in 18 jurisdictions, including Colorado, Florida,
Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts,
Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio,
Pennsylvania, Texas, and West Virginia. In aggregate, Penn National
will now operate more than 49,000 gaming machines, 1,200 table
games and nearly 9,000 hotel rooms, and employ more than 30,000
team members. The acquisition is expected to be accretive to Penn
National’s free cash flow per share in the first year after closing
with approximately $100 million in expected annual run-rate cost
synergies and excluding one-time transaction costs.
Timothy J. Wilmott, Chief Executive Officer of Penn National,
commented, “Our acquisition of Pinnacle Entertainment marks a
significant milestone in Penn National’s 24-year history of growth
as a public company, which has been predicated on our unwavering
commitment to deliver exceptional entertainment to customers,
support for the local communities where we operate and enhancement
of value for our shareholders.
“As the industry leader, Penn National is poised for continued
growth with a portfolio of premiere gaming facilities and more than
five million active customers in its player rewards database. With
the expected incremental free cash flow to be generated from our
expanded base of operations, we believe we are well positioned to
reduce leverage, evaluate additional accretive strategic growth
investments and opportunistically return capital to
shareholders.
“We are pleased to welcome Pinnacle’s team members to Penn
National. Our operating teams consistently deliver best-in-market
gaming, entertainment and dining experiences for our customers. We
expect to realize approximately $100 million in cost-related
synergies and expect to generate further revenue synergies through
efforts such as monetizing our database; cross marketing our
properties; sports wagering; and further leveraging our social
gaming platform.”
TRANSACTION SUMMARYPenn National acquired all of the
outstanding shares of Pinnacle through a public company merger for
consideration of $20.00 in cash and 0.42 shares of Penn National
common stock for each Pinnacle share. In connection with the
transaction, Boyd Gaming purchased 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 $563.5 million in cash, subject to certain customary
closing adjustments.
In addition, GLPI, a landlord for Penn National and Pinnacle
under respective master lease agreements, agreed to amend the terms
of the Pinnacle master lease to permit the divestiture of the three
Pinnacle properties included in the lease. In connection with the
principal transaction, other notable agreements resulted in:
- The sale and leaseback of the real
estate associated with Penn National’s Plainridge Park Casino in
Massachusetts for $250 million, which was added to the Pinnacle
master lease assumed by Penn National.
- The sale of the real estate associated
with Pinnacle’s Belterra Park to an affiliate of Boyd for
approximately $57.7 million through funding provided by GLPI to
Boyd.
- An amendment to the terms of the
Pinnacle master lease to reflect (i) additional annual fixed rent
of $25 million in respect of the Plainridge sale leaseback
described above and (ii) a $13.9 million increase in annual rent,
which will approximate a rent coverage ratio of 1.8x prior to any
anticipated synergies (after adjusting for the divestiture of the
facilities acquired by Boyd and the Plainridge transaction).
- GLPI and Boyd entered into a master
lease agreement for the three divested facilities that were
previously part of the Pinnacle master lease, pursuant to which
Boyd leases the divested real property from GLPI.
Concurrent with the closing of the transaction, Penn National
entered into an incremental joinder to its existing credit
agreement that provides for a $430.2 million senior secured term
loan A facility and a $1.1 billion senior secured term loan B
facility. The proceeds of these new credit facilities were used to
pay the merger consideration, repay certain existing indebtedness
of Penn and Pinnacle and to pay related fees and expenses.
Goldman, Sachs & Co. LLC acted as financial advisor with
assistance from Merrill Lynch Pierce Fenner & Smith
Incorporated and Wachtell, Lipton, Rosen & Katz acted as legal
advisor to Penn National in connection with the transaction. J.P.
Morgan acted as financial advisor and Skadden, Arps, Slate, Meagher
& Flom LLP acted as legal advisor to Pinnacle in connection
with the transaction.
About Penn National GamingPenn National Gaming owns,
operates or has ownership interests in gaming and racing facilities
and video gaming terminal operations with a focus on slot machine
entertainment. Reflecting the recent completion of the Pinnacle
Entertainment transaction the Company now operates 40 facilities in
18 jurisdictions. In total, Penn National facilities feature
approximately 49,000 gaming machines, 1,200 table games and
approximately 9,000 hotel rooms. The Company also offers social
online gaming through its Penn Interactive Ventures division and
has leading customer loyalty programs with over five million active
customers.
Forward-Looking StatementsThis communication may contain
certain forward-looking statements, including certain plans,
expectations, goals, projections, and statements about the benefits
of the transaction, Penn’s plans, objectives, expectations and
intentions, and other statements that are not historical facts.
Such statements are subject to numerous assumptions, risks, and
uncertainties. Statements that do not describe historical or
current facts, including statements about beliefs and expectations,
are forward-looking statements. Forward-looking statements may be
identified by words such as “expect,” “anticipate,” “believe,”
“intend,” “estimate,” “plan,” “target,” “goal,” or similar
expressions, or future or conditional verbs such as “will,” “may,”
“might,” “should,” “would,” “could,” or similar variations. The
forward-looking statements are intended to be subject to the safe
harbor provided by Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934, and the Private
Securities Litigation Reform Act of 1995.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements
including: risks related to the integration of the businesses and
assets acquired; potential adverse reactions or changes to business
or employee relationships, including those resulting from the
completion of the transaction; the possibility that the anticipated
benefits of the transaction are not realized when expected or at
all, including as a result of the impact of, or issues arising
from, the integration of the two companies; risks associated with
increased leverage from the transaction; and other factors
discussed in the sections entitled “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in Penn’s and Pinnacle’s respective most recent Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K as filed with the SEC. Other unknown or
unpredictable factors may also cause actual results to differ
materially from those projected by the forward-looking statements.
Most of these factors are difficult to anticipate and are generally
beyond the control of Penn. Penn undertakes no obligation to
release publicly any revisions to any forward-looking statements,
to report events or to report the occurrence of unanticipated
events unless required to do so by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20181015005514/en/
Penn National Gaming, Inc.William J. Fair, 610-373-2400Chief
Financial OfficerorJCIRJoseph N. Jaffoni, Richard Land,
212-835-8500penn@jcir.com
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