Penn National To Acquire Pinnacle In $2.8 Bln Cash And Stock Deal

(RTTNews) - Pinnacle Entertainment, Inc. (PNK) Monday announced that Penn National Gaming, Inc. (PENN) will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8 billion. The deal is anticipated to be immediately accretive to free cash flow in the first year. The companies expect the transaction to close in the second half of 2018.

As per 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 percent 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 is expected to close in the second half of 2018 and has been approved by the boards of directors.

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 Corp. (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 $100 million in annual run-rate cost synergies following integration and Pro forma for the divestitures and synergies.

As per the agreement Boyd Gaming will be acquiring our Ameristar properties in St. Charles and Kansas City, along with Belterra Casino Resort and Belterra Park for approximately $575 million in cash.

Through the combination Penn National has identified $100 million in annual run-rate cost synergies driven by the elimination of corporate overhead redundancies and improved property level efficiencies, with limited incremental costs required to scale operations and integrate Pinnacle's properties.

The combined company will benefit from additional promotional opportunities in online and social gaming, which will help provide an additional boost to property level performance.

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 $315 million. An amendment to the terms of the Pinnacle master lease following closing of the merger to reflect 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 pursuant to which Boyd will lease the divested real property from GLPI.

Upon completion of the transaction Penn National and Pinnacle shareholders will hold 78 percent and 22 percent, respectively, of the combined company's outstanding shares.