Gaming & Leisure Raises Bid for Pinnacle

Gaming & Leisure Properties Inc. has sent its second bid in four months to purchase Pinnacle Entertainment Inc.’s casinos, this time up 32 percent to $47.50 a share. Pinnacle owns 15 casinos and racetracks, including the M Resort in Las Vegas (l.), in addition to the Heartland Poker tour and 450 acres of development land.

Just a few months after Gaming & Leisure Properties Inc. had an offer to purchase Pinnacle Entertainment Inc.’s (PNK) casinos for a share rejected, they have upped the ante by 32 percent to .50 a share. Gaming & Leisure’s proposal would leave Pinnacle Management to run its 15 casinos and racetracks. PNK is valued at .3 billion and trades more than half-a-million shares each day.

There is no denying that REITs have been the hot ticket in the casino industry ever since Penn National Gaming Inc. split off with its newly formed real estate venture Gaming & Leisure in November 2013. The real estate spin-offs do not pay federal income tax, which passes earnings off directly to shareholders.

The offer from Gaming & Leisure would also give Pinnacle shareholders a 28 percent stake in the REIT. In the letter, Gaming & Leisure wrote, “GLPI has committed financing in place and is ready to finalize this transaction immediately, and we would expect to close our transaction within approximately six months of signing.” The letter continued, “Nevertheless, Pinnacle continues to make new demands, delaying the signing of a definitive agreement and denying its shareholders a value-creating transaction that is clearly superior to Pinnacles previously announced standalone separation plan.”

The letter stated Pinnacle would make annual lease payments of $377 million for all the casinos. Gaming & Leisure’s plan would save Pinnacle several steps, in addition to $700 million in REIT development. Analysts believe the merger is a foregone conclusion, and don’t think an offer for Pinnacle could get any sweeter.

“We have a tough time envisioning a scenario where Pinnacle’s board and management could create the same value in the same time frame that GLPI’s deal would, and we don’t see the likelihood of a superior bid from another entity,” J.P. Morgan gaming analyst Joe Greff said.

In Las Vegas, Pinnacle owns M Resort at the far south end of Las Vegas Blvd., and recently purchased the Tropicana.

On a May 4 investors’ conference call, GLPI CEO Peter Carlino said about the Pinnacle deal, “Our objective is much the same as it was when we first became public with the notion. We are focused on creating a balanced, and I emphasized that word, transaction that would be good for Pinnacle shareholders and good of course for our shareholders.”