Gaming stocks fly after Penn National buyout offer

Jun 19, 2007 5:24 AM

The lure seems to be all that cash floating around the country’s many casinos. It certainly has enticed private equity groups looking for lucrative acquisitions.

Last Friday, the most recent take-over was announced and it immediately caused the shares of most publicly-traded gaming companies to skyrocket.

Penn National Gaming Inc. (PENN), operator of 18 casinos and racinos from Pennsylvania to New Mexico, agreed to be acquired by a partnership involving Fortress Investment group LLC and Centerbridge Partners LP. The price offered was $67 per share, a 31% premium over the trading price.

The buyers also agreed to assume responsibility for the company’s $2.8 billion in outstanding debt making the offer worth $8.9 billion.

Not quite as much as the $17.1 billion that is being paid for Harrah’s Entertainment Inc. (HET) but comparable to the $8 billion that was offered and accepted by the operators of Station Casinos Inc. (STN).

In making the announcement, the board of directors of Penn National said it had determined that "the merger is fair to and in the best interest of Penn National and its shareholders, and recommends that Penn National Gaming shareholders adopt and approve the merger agreement."

Peter Carlino, who took over the operation of the company in the early 70’s when its only asset was a small horse track in Pennsylvania, has been the driving force in the company’s expansion.

Now chairman and CEO, Carlino said, of the buyout, "Since the company’s 1994 initial public offering, Penn National Gaming has transformed itself from the owner of a single racetrack into one of the premier gaming companies in America. Throughout our rapid rise as a publicly traded company, we focused on achieving growth through disciplined financial and risk management."

Fortress Investment Group, which has some $36 billion in assets under management, became publicly traded earlier this year with an initial public offering. The company became part of the political news during the current campaign when it was announced that Democratic presidential candidate John Edwards joined the company in Oct. 2005 as a "senior advisor." Edwards reportedly invested some $16 million in the firm.

Following Friday’s announcement, Penn National’s shares jumped $11 each to close at $62.12. Also affected were: Pinnacle Entertainment Inc. (PNK) up $2.35 to $30.83; Ameristar Casinos Inc. (ASCA) up $2.55 to $34.95; MGM MIRAGE Inc. (MGM) up $3.48 to $85.70 and Isle of Capri Casinos Inc. (ISLE) up $2.45 to $25.09.

Grand Detroit

Early room bookings are now being accepted for the MGM Grand Detroit that will open on Nov. 1.

The property is being marketed as "the only urban gaming destination built from the ground up." It will feature 400 rooms, nine rooftop VIP suites and 56 corner suites that will provide a panoramic view of the Detroit skyline.

Owned by MGM MIRAGE Inc. (MGM), one of three gaming license holders in the Motor City, the new hotel will have nightly rates beginning at $299 for the luxury king; $499 for executive and luxury corner suites and $900 to $3,000 for the penthouse suites.

More acquisitions

Churchill Downs Inc. (CHDN) has expanded its account wagering subsidiary with the purchase of from AmericaTAB. It also bought the data services company,, and the handicapping and pedigree company

Total cost of the acquisitions was given as $80 million.

The additions, said Robert Evans, Churchill’s president and CEO, will generate about $40.6 million in 2008 revenue and will become accretive to earnings during that calendar year.

"AmericaTAB, BRIS and their affiliates have proven to be some of the most efficiently operated and customer-focused ADW platforms and data services in the industry and will be a great complement to our newly-launched TwinSpires account-wagering service," Evans said.

CEO dumped?

Speculation over a proposed buyout offer arose Monday following the announced resignation of James Perry as CEO of Trump Entertainment Resorts Inc. (TRMP).

The company said Perry was leaving because of his wish to return to his family in California. But the Newark Star-Ledger newspaper suggested that Perry actually was fired because of his opposition to a buyout offer received from longtime gaming executive Dennis Gomes and his partners.

According to the newspaper, Perry was the lone dissenter in a board of directors vote to enter negotiations with the Gomes group.

One Wall Street portfolio manager was quoted as asking, "Is there going to be a deal or not?"

Perry, who previously was CEO of Argosy Gaming, is being replaced temporarily by COO Mark Juliano.

THE INSIDER: WMS Industries Inc. (WMS) shares were subject to a 3-2 split with trading under the new arrangement beginning last Friday. The company announced the stock split on May 7.

The Maloof family of Santa Fe, New Mexico, has withdrawn an offer to donate $1 million to have the city name a new library after the late family patriarch Michael Maloof. Criticism of the naming procedure caused the family, which owns the Palms Casino Resort in Las Vegas, to withdraw the offer.

Culinary workers at Harrah’s Entertainment Inc. (HET) have ratified a five-year labor contract that provides increased wages and benefits.

Nevada Gold & Casinos Inc. (UWN) says it has completed the sale of its 22.8% membership interest in American Racing and Entertainment LLC.

Isle of Capri Casinos Inc. (ISLE) says it is revising its third quarter financial report that was issued on April 18 for the period that ended on Jan. 28. The company said it needed to make adjustments relative to lease accounting issues that affect rent expenses.