WEEKLY FEATURE: For GLPI, Second Time’s a Charm

Sat, Jul 25, 2015

The offer Gaming and Leisure Properties, Inc. made to acquire Pinnacle Entertainment, Inc.’s real estate assets has been accepted by Pinnacle. The transaction will be for $4.75 billion in all stock. The transaction is expected to be completed by early 2016. GLPI Chairman Peter Carlino (l.) calls Pinnacle a “leading gaming operator.”

When Gaming and Leisure Properties, Inc. made an offer just a few months back to purchase all of Pinnacle Entertainment, Inc.’s real estate assets, Pinnacle quickly shrugged GLPI off. Just a few weeks back, GLPI came back with a substantially higher offer, this time for .75 billion in an all-stock transaction, an offer too nice for Pinnacle to refuse.

The transaction came as no shock as Pinnacle has been in talks regarding a REIT split, and GLPI is seen as the gold standard for REITs within the gaming industry, having split from Penn National Gaming in 2013, with much success.

The acquisition of property will increase GLPI’s current portfolio of 21 properties across 12 states to a total of 35 casino and hotel assets spread throughout 14 states. GLPI Holdings, Inc., which falls under the umbrella of GLPI, will still own and operate two gaming properties in Baton Rouge, Louisiana and Perryville, Maryland.

GLPI is predicting the acquisition will provide an immediate impact, and will deliver low double-digit percentage increase in annual dividend per share in its first full year. The combination will form and be the 3rd largest publically traded triple-net REIT, while adding $377 million in initial rent revenues to GLPI in the first year after close.

Anthony Sanfilippo, chief executive officer of Pinnacle Entertainment said, “This is a compelling transaction that unlocks the value of Pinnacle’s real estate assets and delivers substantial value to our shareholders.”

Peter Carlino, chairman and CEO of GLPI had similar positive feelings, and said, “Pinnacle’s real estate portfolio brings great properties to GLPI and adds one of the leader gaming operators as a new tenant.”

Sanfilippo feels the company will also be positioned for tremendous growth in the future, and have “pro forma initial year leverage of approximately 3.5x.” Pinnacle’s operating business and real property of Belterra Park Gaming & Entertainment will turn into a separately traded public company “OpCo” while the real estate assets held by remaining company “PropCo” will be acquired by GLPI.

In regards to how current stock will transfer over, Pinnacle shareholders can expect a fixed exchange ratio of 0.85 GLPI common shares per Pinnacle share for PropCo. For each share of Pinnacle, they will receive one share of OpCo common stock.

Both companies expect the transaction to be complete by the first quarter of 2016. Pinnacle will then operate the gaming facilities under a triple-net 10-year Master Lease agreement that will give GLPI five subsequent, five-year extension periods, which will be Pinnacle’s option.