Pinnacle Entertainment, owner of Ameristar Casino and Hotel in East Chicago, will be acquired by Penn National Gaming if a $2.8 billion agreement announced Monday achieves shareholder and regulatory approvals.
The transaction has been authorized by the boards of directors of both companies and is expected to close in the second half of 2018, according to a joint statement from Penn and Pinnacle. The sale calls for shareholders in Pinnacle to receive $20 in cash and 0.42 shares of Penn National common stock for each Pinnacle share.
That reflects a 36-percent premium for Pinnacle shareholders based on Pinnacle’s closing price of $21.86 and Penn National’s closing price of $22.91 on Oct. 4, 2017, according to the companies.
Pinnacle owns and operates 16 gaming and entertainment facilities in 11 states. If the agreement is fulfilled, Penn National will have 41 properties in 20 jurisdictions in the United States and Canada. Among Penn's properties are the Hollywood casinos in Aurora and Joliet, Illinois.
“The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company," said Penn CEO Timothy Wilmott.
Pinnacle Chairman and CEO Anthony Sanfilippo said the two companies have similar business philosophies.
"We believe the combination will produce an even stronger gaming entertainment platform that builds on the individual accomplishments of both companies and benefits our collective team members, shareholders and guests,” Sanfilippo said.
The agreement includes the sale of four Pinnacle properties, including Belterra Casino Resort in Florence, Indiana, to Boyd Gaming, the owner of Blue Chip Casino and Hotel in Michigan City.
In addition to Belterra, which is in the greater Cincinnati area, Boyd will purchase Pinnacle’s gaming operations at Ameristar Kansas City, Ameristar St. Charles near St. Louis, and Belterra Park in Ohio. The sale will be for approximately $575 million in cash. The companies anticipate closing the sales immediately prior to the completion of the Pinnacle acquisition by Penn, conditional upon the Penn acquisition receiving necessary approvals.
The sale of Belterra Casino to Boyd helps Penn overcome a regulatory hurdle in Indiana - the limit of two casino licenses for any one owner. Penn owns Hollywood Casino in Lawrenceburg, and acquiring Pinnacle's two Indiana casinos would have put it over the limit.
For Boyd, the sale adds to its 24 gaming establishments in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.
"This transaction is a compelling opportunity to diversify and expand our nationwide portfolio into new markets at an attractive price," said Keith Smith, president and CEO of Boyd. "By adding these four high-quality, well-maintained assets to our portfolio, we will gain strong positions in three of the largest metropolitan areas in the Midwest."
In addition to shareholder approvals, the deals will require approval by the gaming authorities in the various jurisdictions impacted.