Penn National May Expand Casino Operation
Updated: Tuesday, July 9, 2002 9:38 AM
Posted: Tuesday, July 9, 2002 9:38 AM
Racetrack and casino operator Penn National Gaming (NasdaqNM:PENN) is in talks to buy one of its smaller casino rivals, Hollywood Casino Corp. (AMEX:HWD), according to Reuters Market News.
The deal, which could be valued at about $280 million, comes four months after the casino company put itself up for sale. Hollywood Casino took a substantial hit recently when Illinois passed a major casino tax hike. The company's top casino is in the Chicago area.
Sources told Reuters that the price being discussed is in the range of $11 per share, slightly above Hollywood's closing price Monday of $10.51.
At that valuation, the company would have a market capitalization of about $280 million. Including assumption of Hollywood's debt of about $435 million, a final deal could be worth more than $700 million.
Penn National Gaming spokesman Joe Jaffoni said the company does not comment on market speculation.
"Over the years, Penn has been an acquisitive company," he told Reuters. "In an industry like this, your name gets mentioned, given our past actions and the fact that our strategy says we would grow by acquisition."
Over the past six years, Penn National has grown from its single namesake racetrack near Grantville, Pa., to gaming company that owns or operates five casinos, three racetracks including Charles Town Races in West Virginia, and 11 off-track betting facilities.
If a deal is reached, the $700 million price tag would be well below the $835 million some analysts said Hollywood could fetch when the company first put itself up for sale this spring.
Shares peaked at $17.50 in April, before plummeting to as low as the $7 range in June amid a broader sell-off of casino shares over concerns about the Illinois gaming tax hike and the potential for other states to take similar action.
Shares for most companies have bounced back somewhat since then, but are still well below their peaks reached in late May and early June.
Hollywood shares closed down 40 cents to $10.51 in Monday trading on the American Stock Exchange, while Penn National Gaming shares rose 17 cents to close at $16.87.
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