The purchase is being made by certain funds managed by affiliates of Fortress Investment Group LLC and Centerbridge Partners LP and will be an all-cash transaction. Of the $8.9 billion purchase price, 2.8 billion is currently Penn National’s outstanding debt.

Under the terms of the agreement, Penn National shareholders will receive $67.00 in cash for each outstanding Penn National share. The purchase consideration represents a premium of approximately 31% over Penn National’s closing share price on June 14, 2007. Penn National Gaming has approximately 85.5 million shares outstanding.

The Board of Directors of Penn National Gaming has determined that the merger is fair to and in the best interests of Penn National and its shareholders, and recommends that Penn National Gaming shareholders adopt and approve the merger agreement.

“Since the Company’s 1994 initial public offering, Penn National Gaming has transformed itself from the owner of a single racetrack into one of the premier gaming companies in America,” Peter M. Carlino, Chief Executive Officer of Penn National commented, “Throughout our rapid rise as a publicly traded company, we focused on achieving growth through disciplined financial and risk management. Our Board of Directors’ action approving this transaction underscores our thirteen year commitment to consistently generate value for our shareholders. Fortress and Centerbridge are both leading private equity firms with proven track records and strong reputations. This is a very attractive valuation for our shareholders, at a time when the financial markets are recognizing the strong investment rationale for gaming companies.

Analysts at Bear Sterns see this deal possibly opening up other private equity bids for companies such as MGM MIRAGE and Boyd Gaming. They also suspect it will open the floodgates on other bids for Penn. “Due to the scarcity of quality regional assets, we can't rule out competing bids at this point. Considering the solid balance sheet (ability to lever up) and strong/stable cash flows, we are not surprised by private equity interest in Penn,” said a Bear Sterns analyst’s note.

According to Carlino, the transaction will bring Penn National Gaming new owners who share the company’s current vision who will continue to support their long-term growth strategy, which is accomplished by continued capital investments in existing properties through a de-centralized local management structure, employee training and advancement, internally initiated expansion and development opportunities and acquisitions.

Penn National Gaming’s Chairman and Chief Executive Officer, Peter M. Carlino; Sr. Vice President and Chief Financial Officer, William J. Clifford; and, Executive Vice President, Operations, Leonard M. DeAngelo; as well as other members of its corporate management team, its property level management and personnel are expected to remain with the company.

The merger agreement permits Penn National Gaming, with the assistance of its advisors, to solicit superior proposals from other parties for the 45 day period following the date the merger agreement was executed. There can be no assurances that the solicitation of proposals will result in an alternative transaction.

The transaction is expected to be completed in approximately twelve to sixteen months, and is subject to shareholder approval, FTC approval and approvals from state gaming and racing authorities, as well as satisfaction of certain customary conditions.
The merger agreement does not contain a financing condition. In addition, if the merger is not consummated by June 15, 2008, the per share purchase price will be increased by $0.0149 per day.

Penn National Gaming owns and operates 18 casino and horse racing facilities in fourteen jurisdictions including Colorado, Illinois, Indiana, Iowa, Louisiana, Maine, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. In aggregate, Penn National's operated facilities feature nearly 23,000 slot machines, over 400 table games, approximately 1,731 hotel rooms and approximately 808,000 square feet of gaming floor space. In the latest twelve month period ended March 31, 2007, Penn National generated net revenues of approximately $2.3 billion.

© Copyright 2007 Gambling Central's material. It may not be published, broadcast, rewritten, or redistributed.