Casino operator Pinnacle Entertainment agreed to sell off its real estate assets to Gaming and Leisure Properties Inc. (GLPI) in an all-stock transaction with an enterprise value of $4.75 billion.
On Tuesday, July 21, Pinnacle Entertainment and GLPI finally reached an agreement for a $4.75 billion deal, reports The Street, after GLPI increased its offer earlier this month. The negotiations began in March where GLPI initially offered a $4.1 billion bid to acquire Pinnacle's real estate assets.
In the report, The Street also cited the casino operator being pressured by Orange Capital's Daniel Lewis, activist investor, who previously urged the company to separate real estate assets from its operating business. Lewis first made the suggestion in April 2014 and even advised Pinnacle Entertainment to create a free-standing real estate investment trust (REIT). The company heeded Lewis' advice and announced in November 2014 its plan to distribute REIT shares to shareholders in a tax-free spinoff slated for completion in 2016.
The company's board instead approved a combination deal that is reportedly the third-largest publicly traded triple-net REIT, reports Investors. The deal comprises of a 0.85 share of GLPI for every share of Pinnacle, and one share of OpCo. OpCo is a separately spun off new company that will be publicly traded and will not be acquired by GLPI. The combined REIT, once completed, will boast of 35 hotel and casino facilities across 14 states, including Mississippi, West Virginia, Louisiana, Nevada, Illinois and Iowa. Pinnacle will reportedly lease the space from GLPI to operate the casinos.
According to STL Today, once the deal is completed, GLPI will add two more properties to its portfolio namely River City in south St. Louis County and Ameristar in St. Charles. GLPI already owns several properties and buildings, including three of the six casinos in St. Louis: Hollywood Casino in Maryland Heights, Argosy in Alton and the Casino Queen in East St. Louis. Despite owning a majority of casino properties in the area, GLPI executives said they do not expect anti-trust issues to arise, given that the company has no control over casino operations as it only leases the properties to operators.
The GLPI and Pinnacle Entertainment deal is expected to close during the first quarter of 2016.