With New Acquisition Penn Is Now A National Gaming Powerhouse

[toc]The news that Penn National Gaming acquired Pinnacle Gaming in a blockbuster $2.8 billion deal last week has shaken up the US gaming industry.

The consolidation of two of the biggest gaming companies in the country will have major ramifications for the terrestrial casino industry and online gaming in the US market.

Penn National CEO Timothy Wilmott, said the following after the deal was announced:

“By combining our highly complementary portfolios and similar operating philosophies, we will be able to leverage the strengths of both our companies and create an unparalleled experience for our regional gaming customers, while generating significant value for our shareholders and business partners.”

The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company. Going forward, we will have the financial and operational flexibility to further execute on our strategic objectives, while maintaining our track record of industry-leading profit margins and generating significant cash flow to reduce leverage over time.”

Both sides approved the acquisition. However, as is the case with any deal of this size, it won’t be finalized until the second half o
f 2018.

A big casino corporation just got a lot bigger

Penn National was already one of the biggest gaming companies in the United States. Especially when it comes to dual role of operating gaming properties and serving as slot machine provider thanks to Penn’s decision to get into the VGT game in Illinois. With its acquisition of Pinnacle this week, it grew significantly larger.

When the deal is done, Penn National’s casino and gaming portfolio will boast 41 properties in 20 US jurisdictions.

Penn National currently operates 29 properties in 17 states.

Pinnacle operates 16 properties in 11 states.

If that math doesn’t seem to add up, it’s because Boyd Gaming is buying four of Pinnacle’s Ameristar casinos for $575 million.

Those casinos are:

• Ameristar Casino Resort Spa St. Charles (Missouri)
• Ameristar Casino Hotel Kansas City (Missouri)
• Belterra Casino Resort & Spa (Indiana)
• Belterra Park Gaming (Ohio)

As an aside, Boyd is also separately purchasing Valley Forge Casino in Pennsylvania. News of the sale came just days after the Ameristar announcement.

There’s a new number one in town

The acquisition of Pinnacle will make Penn National the largest slot provider in the US, according to a recent research note from Eilers & Krejcik Gaming.

By E&K’s calculations, with a total of 53,700 slot machines, Penn National will operate roughly six percent of all slot machines in the US. To put that in perspective, Caesars is second on the list with some 46,000 slot machines.

Implications for online gaming

In addition to expanding its land-based gaming footprint, Penn National also sees the acquisition of Pinnacle as a way to leverage its presence in a burgeoning US market: online gaming.

The company mentioned “opportunities” in the online and social gaming space in a press release related to the Pinnacle acquisition. Two areas Penn is already active in.

When it acquired Rocket Games in August 2016, Penn jumped headfirst into the social casino market. Now that it has two casino properties in the Pennsylvania market, Penn National immediately becomes a major player in both social and real-money online gaming. Penn also operates casinos in Nevada, where online poker is legalized and regulated.

Down the road there are even more opportunities.

Several online gaming candidates are among the states Penn National operates in, including:

• Illinois
• Massachusetts
• West Virginia

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