US regional casino operator Penn National Gaming (PNG) has confirmed that it is discussing a potential acquisition of rival Pinnacle Entertainment.
In October, rumors swirled that PNG and Pinnacle had been holding “on-again, off-again” discussions regarding some form of tie-up.
On Thursday, PNG issued a statement saying that “in light of recent market speculation,” it would confirm that it is “engaged in discussions” with Pinnacle regarding a “potential business combination” by which PNG would acquire Pinnacle in “a cash and stock transaction.”
Pinnacle issued a carbon copy statement, adding that there was no guarantee that these discussions would actually lead to a deal of any kind between the two regional racing and gaming operators, who operate a combined 45 properties across 12 states and the Canadian province of Ontario that generate over $5b in annual revenue.
The Wall Street Journal reported that a deal could be announced in “the next few weeks” and that the talks had recently taken on new urgency after PNG sweetened its offer.
PNG’s offer reportedly values Pinnacle stock in the “low-$30s a share.” Pinnacle’s shares closed out Thursday’s trading at $30.68, up 3.65% on the day, but have fallen nearly 2% in after-hours trading. PNG stock improved 1.1% to $28.76. Both companies have enjoyed double-digit share gains since the merger rumors first broke last month.
There are obvious synergies to a fusion of the two companies, which share a landlord in Gaming and Leisure Properties Inc. (GLPI), the real estate investment trust that owns the land under most of PNG and Pinnacle’s gaming venues.
In its Q3 earnings report last month, PNG reported revenue of $806.2m and adjusted earnings of $127.6m in the three months ending September 30.
Pinnacle released its Q3 numbers earlier this month, showing revenue up 8.8% to $647.4m, due in part to the September 2016 acquisition of The Meadows casino in Pennsylvania. Adjusted earnings improved 14.6% to $178.1m, although this figure shrinks to $75.4m once you subtract GLPI’s lease payments.
