Analyst says Penn National Gaming buyer ‘committed’

Jul 31, 2007 8:09 AM

Investors expected to hear that the cost of its impending sale would take away some of the operating luster from the quarterly operating profits of Penn National Gaming Inc. (PENN).

But they were hoping to hear something relative to the progress of the company’s future with Fortress Investment Group when company executives last week announced the results of the second quarter.

Concern came from speculators who felt some private equity companies might have trouble getting the necessary capital to make announced acquisitions. They have been shorting the shares of companies that are involved in takeover deals.

So there was a sigh of relief after the quarterly announcement when respected analyst Larry Klatzkin of Jefferies & Co. said he felt the $6.1 billion cash offer from Fortress for Penn National would go forward.

In a client’s note, he said he felt Fortress and its acquisition partner, Centerbridge, were "committed, deep-pocketed private equity players" and he did not see them backing out of the proposed purchase.

"As the buyers have committed financing coupled with a termination fee of $200 million, "he wrote, "we believe there is little risk the deal would not be completed as planned."

So, despite huge declines in trading on the major markets on both Thursday and Friday, shares of Penn National Gaming fared well, closing on Friday at $57.89, up $1.10 for the day.

As for the quarter, the company said it had net income of $38.3 million or $0.43 per share compared to $42.7 million or $0.49 per share a year earlier. Revenues for the period rose to $625 million from last year’s $538 million.

In addition to the approximate $0.03 expensed due to acquisition charges, the company said it also was hurt by unfavorable currency fluctuations.

Isle of Capri

Still catching up to the previous delays in financial filings with the Security and Exchange Commission, Isle of Capri Casinos Inc. (ISLE) last week filed a revised quarterly form covering the period ending on Jan. 28.

The company said that the Form 10-QA that was filed restated certain of its historical financial statements.

After having made the filing, the company said it now believes that it is in complete compliance with Nasdaq Stock Market listing requirements.

Dover Downs

Investors were disappointed to hear that Dover Downs Gaming & Entertainment Inc. (DDE) had failed to show expected improvement in the second quarter and forced the company’s shares to its lowest point in the past year.

Shares fell to as low as $11.60 on Friday before gaining a bit to $12.18 at the closing bell.

The regional gaming operator that has slot machines at its horse track in Delaware said net income for the quarter rose to $6.4 million or $0.20 per share compares to $6.1 million or $0.19 per share in 2006.

However, the results fell short of the $0.22 per share estimated by the majority of analysts that rate the company.

Also missing expectations was the quarterly revenue that came in at $57.9 million or some $5 million less than analysts expected.

The company said the quarterly results were negatively impacted by increased promotional activity in Atlantic City and more slot activity in Pennsylvania.