Major Acquisition Deal is About to Happen in the US Casino Industry

Penn National, one of the largest gaming operators in the United States announced their plan to acquire another gaming giant, Pinnacle Entertainment for $2.8 billion.

Penn National currently owns 26 casinos and racetracks across the US along with one casino in Canada. They generate around a combined $2.8 billion in revenue a year according to a 2011 report, the latest numbers available online. Pinnacle Entertainment, the company Penn is planning on buying for about their yearly income only runs facilities in the United States currently, 16 casinos. They pulled in $1.49 billion in 2013.

As one can tell by these numbers, these are major players in the US land casino business -  the deal will be a massive one if it goes through. If the two gambling companies merge and manage to just keep their revenues at the current level, let alone increase it, their combined annual earnings will rival Wynn Resorts’, the 4th largest casino operator in the United States.

“This was a very complex four-party transaction and we took a look holistically at the deal and what we needed to handle regulatory approval at the state and federal level,” Penn National Chief Executive Timothy Wilmott told Reuters.

The other two parties involved in the transaction are Boyd Gaming Corp and Gaming and Leisure Properties Inc. Boyd is buying four of Pinnacle’s Ameristar Casinos before Penn takes them over, and will sign a lease agreement with GLPI at the same time, which is the landlord for Penn National and Pinnacle.

When the planned deal was made public on Monday, Penn National’s stock rose sharply, from $29.71 up to $30.75. Then right away it plummeted, but by now, as of Wednesday night, it’s back at $30.75. 

According to Union Gaming Research analyst John DeCree, the new Republican tax cuts were a significant catalyst for the deal, and he expects more mergers and acquisitions to take place in the casino industry next year for the same reason.