Penn National Gaming and Gaming and Leisure Properties, Inc. announced agreements to acquire Bally’s Casino Tunica and Resorts Casino Tunica in Robinsonville, Mississippi on Tuesday morning.
Penn National will assume operations of the casinos for consideration of $44 million in cash, a multiple of 3.7 times the properties’ adjusted EBITDA for the past 12 months.
GLPI will acquire the underlying real estate assets for $82.6 million using a combination of debt and equity, and then lease the properties to Penn National.
Combined, the two sites possess 75,000 square footage of gaming space, 1,747 slot machines and 25 table games, along with six restaurants, 201 hotel rooms and 18,000 square feet of meeting space on the non-gaming side.
“The acquisition of Bally’s and Resorts in Tunica reflects the Company’s focus on creating shareholder value by completing accretive transactions at attractive multiples,” said Peter Carlino, chief executive officer of GLPI in a statement. “[T]he transaction demonstrates our ability to work with our existing partners to create opportunities that are mutually beneficial.”
“We are pleased to partner with Gaming and Leisure Properties to structure this tuck-in transaction which will be immediately accretive to our operating results upon closing,” said Timothy J. Wilmott, Penn National’s president and chief executive officer.
“The acquisition will add two complementary casinos to our existing Hollywood Casino Tunica operations thereby presenting Penn National with the opportunity to benefit from a centralized local management structure,” Wilmott continued.
The transaction is subject to regulatory approvals and is expected to close in the second quarter of 2017.
Upon closing, Penn National will expand its Mississippi portfolio to five casinos – others include Boomtown Casino in Biloxi and Hollywood Casino Gulf Coast in St. Louis, Mississippi.
“Penn has extensive experience operating in the Tunica market and has the ability to effectively maximize the operating potential of the properties. Inclusion of these assets in the master lease is an important benefit of this transaction as it will increase asset diversification, improve aggregate rent coverage and further enhance the benefit of cross-collateralization,” said Carlino.
Markets didn’t view the transaction as a needle-mover. Penn National shares opened the day at $18.29 and jumped as high as $18.66 in the early hours before returning to $11.33 around noon EST. GLPI opened the day at $32.25 but fell as low as $32.05 before rebounding.
“Although Tunica is not growing, it is a generally stable market where PENN currently has a presence and can leverage an existing infrastructure,” said David Katz, an analyst with the Telsey Group. “Given the relatively small size of the deal and that GLPI is buying the real estate, we consider it a tuck-in acquisition that does not transform the strategic direction of the company but is positive nonetheless.”
While Tunica is perceived as a relatively stagnant market, it is well-positioned less than an hour drive from Memphis, Tennessee.
“We estimate Tunica area gaming revenues were down 2% in 2016. The market has stabilized, in our view, with some competition coming out of the market in recent years (Harrah’s Casino Tunica closed in mid-2014) and competition from neighboring dog tracks has moderated,” wrote Cameron McKnight of Wells Fargo.
