Penn National Acquires HPT Parent Pinnacle Entertainment

Penn National Acquires HPT Parent Pinnacle Entertainment

In a major corporate reorganization involving two of the United States’ leading regional casino operators, Penn National Gaming has announced the acquisition of Pinnacle Entertainment. The cash-and-shares deal is valued at $2.8 billion and is largely centered on Pinnacle’s 16 casino properties scattered across 11 US states. The deal also includes the prominent Heartland Poker Tour brand and operations, which have grown to become one of the US’s largest mid-range buy-in poker tours over the last several years.

The purchase of Pinnacle’s 16 properties will eventually result in Penn National operating a 41-casino enterprise. As part of the mechanics of making the deal work, Penn National is divesting four of its own properties to a third casino-entertainment group, Boyd Gaming. Those four properties include three current HPT venues in Ameristar Kansas City, Ameristar St. Charles (Missouri), and Belterra Casino Resort (Indiana).

Whether those properties will remain as part of the HPT’s schedule is unclear, perhaps even unlikely, though the HPT will gain access to larger swaths of the US as part of the deal, even though the HPT factor is but a tiny percentage of the larger deal. It also won’t impact currently scheduled HPT events, as the deal isn’t expected to be finalized until the second half of 2018.

The overall acquisition is pitched by both parties as a deal between two regional casino operators with only mild overlap; a press statement from Penn National pitches this, bullet-point style, as “enhanc[ing] Penn National’s position as North America’s leading regional gaming operator and further diversif[ying] its best-in-class portfolio of gaming assets.”

Here’s some more buzzword bingo talk, courtesy of Timothy J. Wilmott, the Chief Executive Officer of Penn National Gaming. According to Wilmott, “By combining our highly complementary portfolios and similar operating philosophies, we will be able to leverage the strengths of both our companies and create an unparalleled experience for our regional gaming customers, while generating significant value for our shareholders and business partners.”

Wilmott continued, “The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company. Going forward, we will have the financial and operational flexibility to further execute on our strategic objectives, while maintaining our track record of industry-leading profit margins and generating significant cash flow to reduce leverage over time. We look forward to welcoming Pinnacle’s talented employees to our team and to further enhancing our status as North America’s leading regional gaming operator.”

And a bit more from Anthony Sanfilippo, Chairman and Chief Executive Officer of Pinnacle Entertainment, “Pinnacle is a terrific company whose success is due to the efforts of our more than 16,000 team members that focus every day on providing great service and memorable experiences for our guests. Tim and the Penn National team lead a high-quality organization that, like Pinnacle, has a long track record of operational excellence and accretive growth. 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.”

There likely will be some elimination of redundancy on the corporate side over time, as Penn National has identified about $100 million in potential long-term savings. Little of that is likely to affect the HPT, however, which is now poised to gain at least as much as it might lose through the three HPT-hosting properties moving over to Boyd. Penn National retains plenty of other casino properties throughout the Midwest, which will be joined by new venues in Louisiana, Mississippi, Iowa, Colorado, and even Pittsburgh, PA. The HPT itself has already entered into hosting deals with venues in some of these locals, but gains even more access through the larger deal.

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