Penn National Ready to Move Forward
Flush with settlement funds from a failed buyout attempt from private equity groups, Penn National Gaming Inc. said July 24 it is ready to examine the many options it has for its future.
PNGI, which reported a 3.4% profit decline in its second quarter, told analysts in a conference call the company was ready … more or less … to jump back in the saddle as a publicly-traded entity.
“I can’t say I am happy to be back here … as that had not been the plan,” said a chuckling company chairman and chief executive officer Peter M. Carlino in his opening remarks. “But with enthusiasm, we are ready to start this process again.”
PNGI, which includes three Thoroughbred racinos among its 19 gambling facilities, said it gained valuable lessons from an attempted $8.9 billion buyout by Fortress Investments and Centerbridge Partners, as well as $1.475 billion in settlement costs when the deal was terminated in June.
“We had a good contract, and found ourselves in a credit market that was a disaster,” Carlino said toward the end of a one-hour question-and-answer session. “We could have tried to perfect it in court, and done all kinds of nasty and mean stuff. But in the end, you make a business judgment based on what your choices are. We made a decision based on a very difficult market, and taking an impactful settlement was the right thing to do.”
The settlement, terms of which were finalized July 3, include $225 million in cash to PNGI from the two suitors, who along with two banks will also invest $1.25 billion in redeemable preferred equity into the company.
PNGI said its future plans now revolve around paying down debt, and pursuing the acquisition or development of other pari-mutuel and gaming facilities.
“We see lots and lots of opportunity,” Carlino said, mentioning prospects in Las Vegas and New Jersey as among those the company is examining in a “disciplined” manner. “They would have to fit the profile of the Penn customer.”
Company profit in the quarter fell to $37 million, or 42 cents per share, from $38.3 million, or 43 cents per share, last year. Revenue fell slightly to $620.6 million from $625.2 million.
In addition to Hollywood Casino at Penn National in Grantville, Pa., which operated its first full quarter as a racino, PNGI includes among its holdings Thoroughbred racing operations Charles Town Races & Slots in Charles Town, W.Va.; and Black Gold Casino at Zia Park in Hobbs, N. M.
Quarter-over-quarter revenue increased 356.3% to $61.6 million at Hollywood Casino at Penn National, 27.2% to $21.5 million at Black Gold Casino at Zia Park, but declined 5.4% to $122.1 million at Charles Town Races & Slots.
PNGI said it would continue to pursue table game legislation in West Virginia for its Charles Town operation, and plans to add a hotel in the future at Zia Park.
The company also said its Argosy Casino in Lawrenceburg, Ind., was adversely impacted by the recent introduction of slot machines at Hoosier Park and Indiana Downs.
“Penn National has been so successful, we will probably roll out something similar to that in Lawrenceburg,” Carlino said of future plans. “Now that we see where the competition is coming from, we are going to try and glean whatever we business we can from them.”
In mid-afternoon trading on the NASDAQ board July 24, shares of PNGI were down 4.35% to $27.50, or 55.8% lower than the 52-week high of $62.25 recorded Oct. 26, 2007. The per-share buy offer from Fortress and Centerbridge was $67.
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