Penn National To Be Acquired In $8.9 Billion Deal

The gambling world is dominated by a few high-profile names like the MGM Mirage, Wynn Resorts, Harrah’s Entertainment — the same few corporations that, not coincidentally, dominate Las Vegas.

But the spread of casinos to more than 30 states has meant there are valuable treasures throughout the gambling world. One example is Penn National Gaming, the casino and horse racing company, which agreed today to be acquired by two private equity firms for $6.1 billion in cash.

Under the buyout plan, the Fortress Investment Group, one of the country’s larger and more diversified asset management firms, and Centerbridge Partners would also assume $2.8 billion in debt held by Penn National, based in Wyomissing, Pa. The offer gives Penn shareholders $67 in cash per share, or a 31 percent premium over the company’s Thursday closing price of $51.14.

Penn National has 18 gambling operations in 14 jurisdictions, including Pennsylvania, Colorado, Iowa and Missouri, but none in Las Vegas or Atlantic City, the country’s two largest casino markets. The company posted $2.2 billion in revenue last year.

The deal follows months of speculation that Penn National, like Harrah’s and other large gambling corporations in recent years, would go private. A Penn National spokesman, Joseph Jaffoni, said the Fortress-Centerbridge proposal was one of at least two offers the company’s board was considering.

“This is not the first of the gaming companies to go private and I’m certain that it won’t be the last,” said Adam Steinberg, a gambling analyst with Morgan Joseph, an investment banking firm.

Mr. Steinberg called the $67-a-share offer as “a fair initial offer” and high enough to preclude a bidding war and keep shareholders from pressuring Fortress and Centerbridge Partners to up its bid.

The terms of the deal allow Penn National to consider rival bids for up to 45 days. Shares in Penn National closed at $62.12, indicating that the market believes Fortress and Centerbridge offered a large enough premium.

“It seems they set the price high enough so that no one else should come in,” said Lawrence A. Klatzkin, a gambling analyst with the investment firm Jefferies & Company.

But then again, Mr. Klatzkin said, private equity firms have proven “so aggressive” over the past couple of years in the pursuit of companies with strong, predictable cash flow that “one never knows nowadays.”

The company’s top managers are expected to stay in place even after the company goes private. That includes the chief executive, Peter M. Carlino, whose father founded the company in the 1960s, when its holdings added up to a single race track in Reading, Pa.

The company was one of several middle-market gambling companies to begin selling shares to the public in the mid-1990s, but none have matched Penn’s performance as a publicly traded company. Its share prices rose 60-fold in the 12 years between its public offering and the close of trading Thursday.

The company has played one trend particularly well: the reinvention of race tracks as so-called racinos that earn more revenues from slot machines than horse racing. Penn National operates racinos in several jurisdictions, including Hobbs, N.M., and Charles Town, W.Va., where its racino has 5,000 slot machines.

“Long term, there’s nowhere for this company to go but up,” Mr. Klatzkin said.

Tag Cloud

External Information

Additional Information

Where Am I?