On almost every investor conference call, we hear CEOs saying that the merger and acquisition market looks as good as it ever has, and they expect to be in on the action.
So how will this play out?
The short answer is that we don’t know, but we can speculate with the best of them. So here are some thoughts:
REITs have changed M&A and are helping to accelerate it. When Penn National spun off Gaming & Leisure Properties into the first gaming REIT less than three years ago, it looked like a pretty straightforward business. Gaming & Leisure would buy casinos and an operator—most likely Penn—would lease them.
Pinnacle Entertainment liked the idea well enough to create its own REIT, until Gaming & Leisure stepped forward and asked, “Why deal with all the expense and bother? We already exist and can be your REIT for you, with a nice exchange of stock for your shareholders.”
More recently, Boyd Gaming, which does not want to spin off its properties, did the opposite. It purchased Pinnacle properties through Gaming & Leisure as part of the Penn purchase of Pinnacle. That showed a company can play the REIT game without selling properties to a REIT.
Now, we have MGM Growth Properties and VICI Properties, REITs born of MGM Resorts and Caesars Entertainment.
So, who might the buyers and sellers be?
Caesars, for sure. CEO Mark Frissora promised acquisitions prior to the company’s reorganization and won the bid for Centaur’s two Indiana racinos shortly thereafter. Expect more to come.
Penn National and Boyd have been acquisitive and there is every reason to believe they won’t continue to be so.
Eldorado is now a truly national gaming company thanks to its purchase of Isle of Capri. The company makes no bones about its interest in further acquisitions.
Monarch has been slow to grow and still has only two properties. But the company expects to generate a lot of EBITDA after its Black Hawk expansion opens next year, putting it in position to make another acquisition.
Golden Entertainment made its big purchase of American Casino and Entertainment last year and might not pursue a transformational acquisition, but as its debt-to-EBITDA ratios continue to improve, GDEN can be ready for a smaller purchase or two in the not-too-distant future.
There is some speculation that Churchill Downs could be available. Penn National, as a racing as well as casino company, could be a suitor. On the other hand, Churchill might want to buy the portion of Saratoga Gaming it doesn’t own. Dover Downs might be a target of a racing-oriented company, perhaps to Delaware North or Churchill. Privately owned Del North has been a buyer of individual properties, and could be again.
Affinity Gaming is now owned entirely by Z Capital, which someday might want to cash out.
Tropicana could be a buyer or a seller. Chief shareholder Carl Icahn could someday sell. Would Boyd find Trop’s properties a good match? Again, a deal might be facilitated by a REIT.
Little Truckee Gaming keeps adding small casinos in northern Nevada. They could be in Affinity’s wheelhouse, and whoever likes Truckee might like Full House Resorts.
Marnell Gaming is a private, thus under-the-radar, company, but it’s purchase of the Nugget in Sparks shows its acquisitive interests.
Talking about Nuggets, Tilman Fertitta’s Golden Nugget has grown into a significant brand and could grow bigger. Then there’s the Seminole Indians’ Hard Rock that could consolidate properties carrying its name. And talking about Indian tribes, Mohegan and Foxwoods are also growth oriented.
Then there are one-property companies that might just decide it’s time to sell: Silverton in Las Vegas, del Lago in New York, and others.
We could go on, but the point is clear: There are lots of properties out there still to buy, lots of prospective buyers, and several REITs ready to facilitate deals.
