Lawsuit against Cannery settled
Gaming and Leisure Properties, Inc. (GLPI), the real estate investment trust owned by operator Penn National Gaming, has completed its acquisition of the Meadows Racetrack and Casino from Cannery Casino Resorts LLC for $440 million.
The purchase followed a settlement of the lawsuit filed by GLPI last fall against Cannery, in which it claimed its prior purchase agreement and consulting contract was based on misleading information from Cannery about the Washington County racino’s declining performance. The lawsuit alleged fraud and a breach of the purchase agreement.
The $440 million purchase price is inclusive of $10 million previously paid and subject to certain adjustments. The amended purchase agreement includes a settlement of all claims between GLPI and Cannery.
No details were released on the settlement itself, but analysts say the operational rebound likely played a role. “While the process could have dragged on for considerably longer, it appears the two sides have found a common ground, likely helped by property fundamentals improving from 2014,” said Deutsche Bank gaming analyst Carlo Santarelli in a note to investors.
“The Meadows property has displayed a strong turnaround, providing increased confidence and visibility, which in our view warrants a higher multiple,” said Credit Suisse gaming analyst Joel Simkins in an interview with the Las Vegas Review-Journal.
The Meadows features a 180,000-square-foot casino, a 24-lane bowling center, 11 restaurants, bars and lounges, and the adjacent 5/8-mile harness racing track, which has been a fixture of the local area since 1963. The casino, which opened in 2007, features 3,172 slot machines, 74 table games and 14 poker tables. There is an adjacent 154-room hotel, owned and operated by a third-party operator, opened last April. It is connected to the casino by a sky bridge.
The purchase price, which the company intends to fund with a combination of equity and debt, represents approximately 9.6 times the property’s LTM EBITDA. In a press releases, GLPI said it is “actively engaged in a search for a third-party operator for the property, to whom the company expects to sell the entities holding the licenses and operating assets, while retaining ownership of the land and buildings.”
The transaction is subject to and requires approval from the Pennsylvania Gaming Control Board and the Pennsylvania Harness Racing Commission, and is expected to close in the second half of 2016. The transaction has an outside closing date of November 2016.
“We are pleased to resolve the Cannery litigation in a manner that we believe is positive for both companies,” said Peter M. Carlino, chairman and CEO of Gaming and Leisure Properties. “The amended agreement allows us to add The Meadows to our growing portfolio of high-quality regional gaming assets at a price that is reflective of current property performance.
“The property has enjoyed improving performance in the second half of 2015, and we look forward to partnering with one of the many quality operators in the gaming industry to continue that momentum.”
William Paulos, co-CEO of Cannery Casino Resorts, commented, “This resolution is a good outcome for CCR shareholders. All of the net sale proceeds will be used to reduce our debt and better position us for the future. We are now focused on working with GLPI to ensure a smooth transition for our team members and customers.”
GLPI, which was spun off in 2013 as a wholly owned subsidiary of Penn National Gaming, is currently involved in gathering regulatory approvals for its acquisition of the 15 properties of Pinnacle Entertainment.
