inal approval leaves Penn awash in cash and a probable buyer of distressed casinos or rivals’ casino stock in a depressed market. When the us$ 67 a share deal with a private equity group was terminated in July, Penn, which operates 19 casinos including the Argosy Casino Hotel & Spa in Riverside, promised "to be aggressively opportunistic at a time when gaming industry valuations appear very attractive."
In a conference call with analysts earlier this week, Penn CEO Peter Carlino underlined that strategy and said the company is poised to "cherry pick the right opportunity, if it appears." The acquisition group now will pay Penn a us$ 225 million merger breakup fee and will buy us$ 1.25 billion of Penn nonvoting, zero-coupon preferred equity, redeemable in 2015 for cash or common stock - in effect, an interest-free loan.
The original acquisition group included affiliates of Fortress Investment Group LLC, Centerbridge Partners LP, and investment bankers Deutsche Bank and Wachovia. Some settlement funds were paid earlier this year and analysts this week are lauding the deal that leaves Penn cash-rich even after paying down some debt and buying back an estimated 1.1 million of its own shares.
Joel Simpkins, an analyst with Macquarie Securities USA, speculated to Bloomberg News this week that Ameristar Casinos, Pinnacle Entertainment and selected properties owned by Harrah’s Entertainment could be on Penn’s shopping list. However, those companies each operate two of Missouri’s 12 casinos, and Pinnacle is building its third now south of St. Louis.
Acquisition by Penn of any companies in Missouri or other markets where it operates could raise thorny competitive issues with regulators.