Casino Connection Nevada

Questions on Penn deal

by Staff

Last year, Penn National Gaming agreed to a buyout offer from Fortress Investment Group LLC and Centerbridge Partners, L.P., but the deal values the company’s stock significantly higher than does the market.

The buyout offer prices Penn shares at $67 each, but the company’s stock—after an initial surge following the announcement—is hovering around $45. This leaves the potential for big profits to be made, but some are wondering why the buyout is valuing the company nearly 50 percent higher than the market is.

It is no secret that Wall Street is taking a wait-and-see approach to the gaming industry, so the initial speculation is that the investment market doesn’t think the deal, scheduled for a June 15 completion date, will go through at all.

Others think the chaos in the investment market is leading to Penn stocks being undervalued. Ultimately, the deal will go through, they say.

Fortress and Centerbridge want to be in the casino business, and aren’t simply looking to generate quick, short-term profits. They want to buy an established and respected company that has not only quality existing properties, but also the potential to grow in markets like Atlantic City and Las Vegas.

There is certainly some risk in the deal falling through, and the licensing process could be long given the number of jurisdictions in which Penn operates, but some Penn executives have exercised options and completed stock sales—which the can’t do if they have any reason to believe the deal will fall through—recent company filings indicate the approval process is progressing on time.