PENN completes merger

Oct 4, 2005 5:49 AM

Although the state of Illinois extracts multi-millions of dollars each year from the nine licensed riverboat casinos operating in that state, few in the industry would suggest that the environment is conducive to investment.

That’s what Penn National Gaming Inc. (PENN) found out last week when they finally were able to work out a deal that would permit them to go forward with its acquisition of Argosy Gaming Company (AGY).

Penn National Gaming announced on Monday that it had completed the merger.

For months, Penn National executives trudged through a number of gaming jurisdictions with their business plan for the acquisition. Regulators in West Virginia, Louisiana, Mississippi, Pennsylvania, New Jersey, Colorado and Maine all gave their stamps of approval for the project.

But when it was time for Illinois to review the plans, regulators decided they wanted to spend more time studying the impact the merger would have on gaming in the state. What they did privately was to tell Penn National they would not approve the plan without modifications. These included the sale of two Illinois riverboats.

The agreement provides that Penn National will divest itself of both the Argosy Casino in Alton and the Empress Casino in Joliet by the end of 2006.

Although analysts estimated the purchase of Argosy by Penn National will still be accretive, the potential benefit will be substantially reduced since the sale price of the two specified casinos might be adversely affected by the Illinois gaming climate.

Still pending in the Land of Lincoln is the status of the state’s 10th and final gaming license that was held by the defunct Emerald Casino of Rosemont but is now being challenged by the Illinois Gaming Board. Some state officials said they hoped the license would be declared invalid so that it could be auctioned off.

However, the value of that license could be influenced by the restrictions applied, such as specifying the locale in which in could be located, and by the amount of interest shown in the sale of the Argosy boats.