Its $6 billion buyout may have collapsed, but business life goes on - quite aggressively - for Penn National Gaming.
Last week, the grand opening of its new slot machine palace in Maine set revenue and attendance records. This quarter it plans to open a new hotel at its casino and race track in Charles Town, WV, near the lucrative Washington, DC, market. It also is planning a new 270,000 square foot gambling barge in Indiana and positioning itself to move into Maryland if voters there approve slots in November.
Penn National, one of the nation’s biggest gambling companies outside of Nevada, also has nearly $1.5 billion in new cash to spend because of its termination agreement with the firms that had agreed to take it over and the banks that were going to fund the deal.
“We believe the substantial capital infusion will enable Penn National to be aggressively opportunistic at a time when gaming industry valuations appear very attractive,” CEO Peter Carlino said in a statement.
The gambling industry, once thought recession proof, is being hurt by the national economic slowdown.
Carlino said he was disappointed that the $67 a share buyout didn’t go through, but given current economic conditions and the gaming industry outlook, he believes this is a good outcome for Penn National. The company’s stock closed at about $30 a share last week.
“We may be in the gaming business, but we would never gamble the Company’s future,” Carlino said.
Founded in 1972, Penn National operates casinos, horse race tracks (and one dog track) in 14 states and Canada. It employs 16,000 and generates about $2.5 billion in annual revenue. Last year, the Pennsylvania-based company made Fortune’s list of the 100 fastest growing companies for the sixth time.
The buyout deal with Fortress Investment Group and Centerbridge Partners was announced a year ago, but was undermined by turmoil in the credit markets and a slowing economy. The Wall Street Journal reports that one-fifth of all the leveraged buyout deals for American companies that were announced in 2007 have been terminated.
Penn National, with about $3 billion in long-term debt, said it plans to use the money from the termination agreement to repay existing debt, acquire and develop gaming facilities and repurchase company stock.
As part of the deal, Fortress chairman and CEO Wesley Edens will join Penn National’s board of directors.
In February, Tim Wilmott joined Penn National as COO. Previously, he held the same position at Harrah’s Entertainment, one of the largest gambling companies in the world.
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