Pinnacle Entertainment sold for $32.47 per share
Penn National Gaming (PENN) and Pinnacle Entertainment (PNK) announced that they have entered into a definitive agreement under which Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8B.
Under the terms of the agreement, Pinnacle shareholders will receive $20.00 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 closing price on December 15, 2017.
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 on October 4, 2017.
The 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 (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 $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.
Gaming and Leisure Properties (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 permit the divestitures.
In connection with the transaction, Penn National, GLPI and Boyd have agreed to the following:
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 $315M.
An amendment to the terms of the Pinnacle master lease following closing of the merger to reflect an annual fixed rent payment of $25M for Plainridge Park Casino and $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.
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 companies expect the transaction to close in the second half of 2018.
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