by Ray Poirier | Supporters of the opinion that the buyout of Penn National Gaming Inc. (PENN) will take place, possibly this summer, got a boost last week.
The deal, proposed almost a year ago, was for the company to be acquired by a pair of private equity companies for $67 per share.
Since that time, 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 price decline caused gloom to set in among many shareholders.
The picture changed a bit last week, however, when Fortress Investment held a conference call after announcing that the company had a loss of $29 million in the fourth quarter. During the discussion, a company official said that although the PENN deal remained underfunded 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.
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 at a lower price. Just how low, only time will tell.