Penn National Gaming announced Wednesday it will acquire three more casinos for $780 million. When completed, the deal will make the racing and casino company the seventh largest gaming operation in the United States with annual revenue exceeding $1 billion.
The casinos to be acquired are owned by Hollywood Casino Corp. (Amex: HWD) whose board of directors has agreed to merge with Penn National at a price of $12.75 per share. The deal's total cost includes the assumption of $569 million in long-term debt.
Hollywood Casino shareholders still must approve the deal, though certain stockholders who control approximately 50.3% of the outstanding shares have agreed to vote in favor of the transaction. The deal also is subject to regulatory approval and is expected to close during the first half of 2003.
Once completed, Penn National (Nasdaq:PENN) would own six dockside gaming facilities, a land-based casino, the Charles Town Races racetrack and casino in West Virginia, Penn National Race Course and Pocono Downs racetracks in Pennsylvania, 11 off-track wagering sites, and hold a casino management contract for an Canadian casino.
"The acquisition of these well established properties represents a significant growth and expansion opportunity for Penn National and is attractive both strategically and financially," said Peter Carlino, chief executive officer for Penn National. "The acquisition, which almost doubles our revenue base, is expected to be accretive to our operating results upon closing, builds the critical mass of our gaming operations and further diversifies the geographic reach of our operations without any overlap with our existing properties."
Hollywood Casino and its subsidiaries own and operate Hollywood-themed casinos in Aurora, Ill., Tunica, Miss., and Shreveport, La. The Illinois dockside casino is the premier property with 117,000 square-feet of gaming and dining space about 35 miles west of downtown Chicago. Hollywood Casino Aurora has 1,105 slot machines, 36 table games, and the only poker room in Chicago.
The terms of the agreement would provide Hollywood Casino shareholders with a 34% premium to the closing price of our stock on June 27, the day before the company announced it was negotiating with Penn National.
"In addition to being a terrific transaction for our shareholders, we think the merger of our two companies provides our employees with a tremendous opportunity," said Edward T. Pratt III, chairman and CEO of Hollywood Casino. "The combined company will be a large, diversified gaming company with a bright future. We are pleased to note that after the merger our properties will continue to operate under the Hollywood Casino brand. We also understand that Penn National's existing properties plan to adopt the Hollywood Casino name and theme after the merger."