Penn National To Acquire Greektown Casino-Hotel's Operations

Penn National Gaming, Inc. (NASDAQ:PENN) has entered into definitive agreement with JACK Entertainment, LLC to purchase the operations of Greektown Casino-Hotel in Detroit, MI. Valued at nearly $300 million, the deal is likely to be sealed in mid-2019, subject to regulatory approval. Following the news, shares of the company surged 7.9% yesterday.

VICI Properties will purchase the land as well as real estate assets of Greektown for nearly $700 million. Following the closure of the deal, Penn National will enter into a triple net lease agreement with VICI Properties Inc. (VICI) for the Greektown facility. Per the lease agreement, Penn National will pay roughly $55.6 million as annual fee for an initial term of 15 years. The company also has an option to renew the lease agreement for five more years.

Notably, the deal will be financed with cash on hand and debt. Per Penn National, the Greektown Casino-Hotel will further boost its revenues, and expand the operating and customer base. Penn National will also be able to realize significant synergies, following the deal. J. Wilmott, Penn National’s chief executive officer said that “With an OpCo purchase multiple of 6.3x anticipated annual run-rate adjusted EBITDA and including synergies to be realized within eighteen months, we believe this transaction again highlights our commitment to enhancing shareholder value.”

Greektown Casino-Hotel has 100,000 square feet of casino space and nearly 2,700 gaming machines and 60 table games. It also has a poker room, seven fast casual food outlets, three restaurants coffee shop and four bars. We believe the deal will prove beneficial to Penn National’s as 41 properties in 19 jurisdictions will be added to its portfolio.

Currently, Penn National is known for its acquisition strategies that help the company expand its presence and improve revenue yields. In 2017, the company entered into an agreement to acquire Pinnacle Entertainment, Inc. — a leading regional gaming operator. This transaction closed on Oct 15, 2018. Post the transaction, the company has 12 more properties in its portfolio.

Moving ahead, Penn National expects to realize synergies worth $100 million from its Pinnacle acquisition. Meanwhile, in Pennsylvania, the company acquired two category 4 licenses in the bidding process during the first quarter.

Stock Performance

In a year’s time, shares of Penn National have lost 21.9% compared with the industry’s 28.5% decline. This showcases the company’s weak earnings trend. Although the company’s bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters, it recorded an average miss of 23.3%.

Stocks such as Boyd Gaming Corporation (NYSE:BYD) , Las Vegas Sands Corp. (NYSE:LVS) and MGM Resorts International (NYSE:MGM) , which belong to the same industry, witnessed a decline of 16.6%, 17.9% and 20.3%, respectively, in a year’s time.

Penn National currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wall Street’s Next Amazon (NASDAQ:AMZN)

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>