What price Penn sale?

March 31, 2008 9:39 PM
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by Ray Poirier | Within the past couple of months Station Casinos Inc. (STN) and Harrah’s Entertainment Inc. (HET) left the public sector and had their symbols removed from the trading floor.

That leaves Penn National Gaming Inc. (PENN) whose buyers have until June 15 to take over its racetracks and casinos for the agreed upon price of $67 per share.

Fat chance, say Wall Street investors.

Since late last year, market watchers have seen the price of PENN shares decline consistently. Not too long ago it fell to its 52-week low of $38.76 per share. This makes it possible for buyers, Fortress Investment Group Inc. (FIG) and Centerbridge Partners, to acquire PENN shares on the open market at a discount to the takeover price.

The picture changed a bit last week when Fortress Investment held a conference call after announcing that the company had loss $29 million in the fourth quarter. But a company official said that although the PENN deal remained unfunded plans were going forward and that it was expected the funding would become available this summer. Meanwhile, the effort to get all the necessary regulatory approvals was continuing, he said.

Wow! Within no time, the price of PENN shares jumped 12%.

But the euphoria didn’t last long, only long enough for the market to hear that a private equity takeover of Clear Channel Communications had hit a stone wall and litigation had begun. Simply stated, the banks that had agreed to provide the funding for this deal had backed out.

Some of these same banks were the ones that had promised to back the Penn National buyout.

It now seems possible that rather than face more litigation from the Penn people the financial institutions will seek to cut another deal for a lower price. Just how low, only time will tell.