Penn National Gaming, Inc. (PENN: Nasdaq) (“Penn National” or
the “Company”), announced today that it has entered into a
definitive agreement to acquire RIH Acquisitions MS I, LLC and
RIH Acquisitions MS II, LLC, the holding companies for the gaming
operations of Bally’s Casino Tunica and Resorts Casino Tunica,
for total consideration of approximately $44.0 million cash. With a
purchase multiple of 3.7x trailing twelve months adjusted earnings
before interest taxes depreciation and amortization (“EBITDA,” a
non-GAAP financial measure defined below) after master lease
payments, and a lower post-synergies pro-forma multiple,
Penn National believes this transaction further supports the
Company’s goal of enhancing shareholder value.
Timothy J. Wilmott, Penn National’s President and Chief
Executive Officer, stated, “We are pleased to partner with Gaming
and Leisure Properties to structure this tuck-in transaction which
will be immediately accretive to our operating results upon
closing. The acquisition will add two complementary casinos to our
existing Hollywood Casino Tunica operations thereby presenting
Penn National with the opportunity to benefit from a centralized
local management structure. We intend to make modest cap-ex
investments at the newly acquired casinos to elevate the guest
experience while implementing our Marquee Rewards player loyalty
program to allow guests to access Penn National’s growing portfolio
of properties including our Tropicana Las Vegas resort.”
Following the completion of the proposed transaction, Penn
National will operate both Tunica properties and lease the
underlying real property associated with these two businesses from
Gaming and Leisure Properties, Inc. (GLPI: Nasdaq) (“GLPI”)
pursuant to the terms of the Company’s existing Master Lease with
GLPI, with total initial annual rent of $9.0 million subject to the
provisions included in the terms of the Master Lease. On a combined
basis, Bally’s Casino Tunica and Resorts Casino
Tunica generated adjusted EBITDA of approximately $21.0
million for the twelve month period ended December 31, 2016.
Bally’s Casino Tunica, the closest Tunica-area casino to
downtown Memphis, features a 40,000 square foot casino with 947
slot machines and 16 table games, along with a steakhouse, buffet
restaurant, 24-hour café, and a live entertainment venue. Resorts
Casino Tunica, which is located adjacent to Penn National’s
existing Hollywood Casino Tunica, features a 35,000 square
foot casino with 800 slot machines and 9 table games. The property
also offers a steakhouse, buffet restaurant and 24-hour café as
well as 18,000 square feet of meeting and event space and a
201-room hotel.
The transaction, expected to close in
the second quarter of 2017, is subject to the approval of
the Mississippi Gaming Commission and other customary closing
conditions.
In addition to GAAP financial measures, adjusted EBITDA is used
by management as an important measure of the Company’s operating
performance. We define adjusted EBITDA as earnings before interest,
taxes, stock compensation, debt extinguishment charges, impairment
charges, insurance recoveries and deductible charges, depreciation
and amortization, changes in the estimated fair value of our
contingent purchase price obligations, gain or loss on disposal of
assets, and other income or expenses. Adjusted EBITDA is also
inclusive of income or loss from unconsolidated affiliates, with
our share of non-operating items (such as depreciation and
amortization) added back for our joint venture in Kansas
Entertainment. Adjusted EBITDA excludes payments associated with
our Master Lease agreement with GLPI as the transaction was
accounted for as a financing obligation. Adjusted EBITDA has
economic substance because it is used by management as a
performance measure to analyze the performance of our business, and
is especially relevant in evaluating large, long lived casino
projects because they provide a perspective on the current effects
of operating decisions separated from the substantial
non-operational depreciation charges and financing costs of such
projects. We also present adjusted EBITDA because it is used by
some investors and creditors as an indicator of the strength and
performance of ongoing business operations, including our ability
to service debt, fund capital expenditures, acquisitions and
operations. These calculations are commonly used as a basis for
investors, analysts and credit rating agencies to evaluate and
compare operating performance and value companies within our
industry. In addition, gaming companies have historically reported
adjusted EBITDA as a supplement to financial measures in accordance
with GAAP. In order to view the operations of their casinos on a
more stand-alone basis, gaming companies, including us, have
historically excluded from their adjusted EBITDA calculations
certain corporate expenses that do not relate to the management of
specific casino properties. However, adjusted EBITDA is not a
measure of performance or liquidity calculated in accordance with
GAAP. Adjusted EBITDA information is presented as a supplemental
disclosure, as management believes that it is a widely used measure
of performance in the gaming industry, is used in the valuation of
gaming companies, and that it is considered by many to be a key
indicator of the Company’s operating results. Management uses
adjusted EBITDA as an important measure of the operating
performance of its segments, including the evaluation of operating
personnel. Adjusted EBITDA should not be construed as alternatives
to operating income, as indicators of the Company’s operating
performance, as alternatives to cash flows from operating
activities, as a measure of liquidity, or as any other measures of
performance determined in accordance with GAAP. The Company has
significant uses of cash flows, including capital expenditures,
interest payments, taxes and debt principal repayments, which are
not reflected in adjusted EBITDA. It should also be noted that
other gaming companies that report adjusted EBITDA information may
calculate adjusted EBITDA in a different manner than the Company
and therefore, comparability may be limited.
About Penn National Gaming
Penn National Gaming is a diversified, multi-jurisdictional
owner and manager of gaming and racing facilities and video gaming
terminal operations. The Company recently expanded into social
online gaming offerings via its Penn Interactive Ventures, LLC
division and its recent acquisition of Rocket Speed, Inc. (formerly
known as Rocket Games, Inc.). Penn National currently owns,
manages, or has ownership interests in twenty-seven facilities in
the following seventeen jurisdictions: California, Florida,
Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi,
Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania,
Texas, West Virginia, and Ontario, Canada.
Forward-Looking Statements
The discussion in this press release may include
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements can
be identified by the use of forward looking terminology such as
“expects,” “believes,” “estimates,” “intends,” “may,” “will,”
“should” or “anticipates” or the negative or other variation of
these or similar words, or by discussions of future events,
strategies or risks and uncertainties. Such forward looking
statements are inherently subject to risks, uncertainties and
assumptions about Penn National Gaming and its subsidiaries,
including risks relating to required regulatory approvals and other
conditions to closing the acquisitions described herein, the
successful integration of such acquisitions and our ability to
realize potential synergies or projected financial results from
such acquisitions, and accordingly, any forward looking statements
are qualified in their entirety by reference to the factors
described in Penn National Gaming’s Annual Report on Form 10-K for
the year ended December 31, 2016, subsequent Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K as filed with the
Securities and Exchange Commission. All subsequent written and oral
forward looking statements attributable to Penn National Gaming or
persons acting on the Company’s behalf are expressly qualified in
their entirety by the cautionary statements included herein. Penn
National Gaming undertakes no obligation to publicly update or
revise any forward looking statements except as required by
law.
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version on businesswire.com: http://www.businesswire.com/news/home/20170328005531/en/
Penn National Gaming, Inc.William J. Fair, 610-373-2400Chief
Financial OfficerorJCIRJoseph N. Jaffoni / Richard Land,
212-835-8500penn@jcir.com
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