(PRESS RELEASE) -- Gaming and Leisure Properties, Inc. and Pinnacle Entertainment,
Inc. today jointly announced that they have entered into a definitive agreement under which GLPI will acquire substantially all of Pinnacle's real estate assets in an all-stock transaction.
Under the terms of the agreement, which was unanimously approved by both companies' Boards of Directors, Pinnacle's operating business and the real property of
Belterra Park Gaming & Entertainment Center will be spun off into a separately traded public company ("OpCo") and the real estate assets held by the remaining company ("PropCo") will be acquired by GLPI. Pinnacle shareholders will receive a fixed exchange ratio of 0.85 GLPI common shares per Pinnacle share for PropCo. Pinnacle shareholders will also receive one share of OpCo common stock for each share of Pinnacle they own.
"Pinnacle's real estate portfolio brings great properties to GLPI and adds one of the leading gaming operators as a new tenant," said Peter Carlino, Chairman and CEO of GLPI. "Pinnacle's proven track record of continued improving operating performance will make GLPI even stronger
as we pursue long-term growth. The combination of these extremely attractive gaming real estate portfolios will create the third largest publicly traded triple-net REIT, with the scale, diversity and financial strength to deliver increased value to both companies' shareholders. Our combined shareholders will benefit from the stable, significant cash flows that we will generate from our long-term lease agreements - along with our commitment to maintaining a strong balance sheet, including an investment grade credit rating that will enable us to pursue future opportunities. We are excited to develop a mutually beneficial, long-term relationship with a quality organization and we look forward to working with them on future additional transaction opportunities."
"This is a compelling transaction that unlocks the value of Pinnacle's real estate assets and delivers substantial value to our shareholders," said Anthony Sanfilippo, Chief Executive Officer of Pinnacle Entertainment. "In addition, Pinnacle shareholders will have the opportunity to benefit from owning a larger, more diversified REIT. As a premier operator of casino, resort and entertainment properties, Pinnacle will continue to improve its operating efficiency, expand property level margins and pursue growth opportunities that leverage the Company's proven management and development skills. Our Company will be well capitalized and positioned for future growth with pro forma initial year leverage of approximately 3.5x, and have the financial flexibility to capitalize on future value-enhancing opportunities."
The agreed-upon exchange ratio gives PropCo an implied enterprise value of $4.75 billion, implying 12.6x initial year PropCo adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), or 13.2x including transaction-related fees and expenses. Pro forma for the transaction, existing Pinnacle shareholders will own 100 percent of OpCo and approximately 56 million shares in GLPI, representing an approximate 27 percent equity interest in the larger, post-transaction GLPI. Pinnacle's OpCo will continue to own and operate other assets, including Belterra Park Gaming & Entertainment, the Heartland Poker Tour, Pinnacle's interest in
Retama Park, gaming licenses, gaming equipment as well as approximately 450 acres of developable land, principally in Lake Charles and Baton Rouge, adjacent to real estate GLPI would acquire.
After the close of the transaction, which the companies expect will be completed in the first quarter of 2016, Pinnacle will operate the leased gaming facilities under a triple-net 10-year Master Lease agreement with GLPI that will have five subsequent, five-year extension
periods at Pinnacle's option. Pinnacle will initially pay GLPI $377 million in rent in the first year after close, which will result in a lease coverage ratio of 1.9x adjusted property earnings before interest, taxes, depreciation, amortization and rent (adjusted property EBITDAR)/lease expense. GLPI anticipates the transaction will deliver low double-digit percentage accretion to its pro forma adjusted funds from operations (AFFO) per share in the first year after close. Under the triple-net lease structure, GLPI will benefit from the continued revenue growth of Pinnacle's operating assets. The combined REIT expects to continue to distribute at least 90 percent of its annual taxable income as dividends, and the first full year dividend per share is expected to increase by approximately a low double-digit percentage.
The addition of Pinnacle's 14 properties in 7 states to GLPI's existing portfolio of 21 properties in 12 states will give the combined company 35 casino and hotel assets across 14 states. The combined REIT will lease 18 of its facilities to Penn National Gaming, 14 to Pinnacle and one to Casino Queen in East St. Louis, Illinois. GLPI Holdings, Inc., a subsidiary of GLPI, will continue to own and operate two gaming facilities located in Baton Rouge, Louisiana and Perryville, Maryland.
The transaction is subject to customary closing conditions, including regulatory approvals and the approval of GLPI and Pinnacle's shareholders. The Carlino Family Trust and Fortress Investment Group have signed agreements to vote in support of the transaction.
GLPI has secured committed financing for the transaction from BofA Merrill Lynch and J.P. Morgan, subject to customary conditions. Pinnacle has secured committed financing from J.P. Morgan, Goldman, Sachs & Co., BofA Merrill Lynch, U.S. Bank, Fifth Third Bank, Wells Fargo Bank, Credit Agricole and Deutsche Bank.
Morgan Stanley, BofA Merrill Lynch and J.P. Morgan Securities LLC are acting as financial advisors and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to GLPI. Goldman, Sachs & Co. is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP and Gibson, Dunn & Crutcher LLP are acting as legal advisors to Pinnacle.
PRO FORMA PROPERTY INFORMATION
Properties Owned by GLPI and Leased to Pinnacle OpCo:
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Property Name Location
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Ameristar Casino Resort Spa Black Hawk Black Hawk, Colorado
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Ameristar Casino & Hotel East Chicago East Chicago, Indiana
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Belterra Casino Resort Florence, Indiana
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Ameristar Casino Hotel - Council Bluffs Council Bluffs, Iowa
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L'Auberge Casino Hotel Baton Rouge Baton Rouge, Louisiana
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Boomtown Casino & Hotel Bossier City Bossier City, Louisiana
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L'Auberge Casino Resort Lake Charles Lake Charles, Louisiana
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Boomtown Casino New Orleans New Orleans, Louisiana
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Ameristar Casino Hotel - Vicksburg Vicksburg, Mississippi
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Ameristar Casino Hotel - Kansas City Kansas City, Missouri
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Ameristar Casino - St. Charles St. Charles, Missouri
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River City Casino & Hotel St. Louis, Missouri
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Cactus Petes Resort Casino Jackpot, Nevada
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The
Horseshu Hotel and Casino Jackpot, Nevada
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Properties Owned by GLPI and Leased to Penn National Gaming:
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Property Name Location
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Argosy's Alton Alton, Illinois
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Hollywood Casino - Aurora Aurora, Illinois
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Hollywood Casino - Joliet Joliet, Illinois
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Hollywood Casino - Lawrenceburg Lawrenceburg, Indiana
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Hollywood Casino Hotel & Raceway Bangor Bangor, Maine
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Hollywood Casino - Bay St. Louis Bay St. Louis, Mississippi
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Boomtown Biloxi Casino Biloxi, Mississippi
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Hollywood Casino - Tunica Tunica, Mississippi
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Argosy Casino Hotel & Spa Riverside, Missouri
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Hollywood Casino - St. Louis Maryland Heights, Missouri
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Zia Park Casino Hobbs, New Mexico
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The
M Resort Spa & Casino Las Vegas Henderson, Nevada
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Hollywood Casino - Columbus Columbus, Ohio
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Hollywood Gaming at Dayton Raceway Dayton, Ohio
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Hollywood Casino Toledo Toledo, Ohio
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Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio
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Hollywood Casino at Penn National Race Course Grantville, Pennsylvania
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Hollywood Casino - Charles Town Charles Town, West Virginia
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Properties Owned by GLPI and Leased to Casino Queen:
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Property Name Location
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Casino Queen Hotel East St. Louis, Illinois
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Properties Owned and Operated by GLPI Holdings, Inc., a subsidiary of GLPI:
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Property Name Location
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Hollywood Casino - Baton Rouge Baton Rouge, Louisiana
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Hollywood Casino - Perryville Perryville, Maryland
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SUMMARY OF PINNACLE MASTER LEASE TERMS:
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- "Triple Net" Master Lease: Pinnacle OpCo is responsible for maintenance capital expenditures,
property taxes, insurance and other expenses
- All properties subject to the lease to be cross-defaulted / guaranteed by Pinnacle OpCo
Lease - OpCo is responsible for acquisition, maintenance, operation and disposition of all (including gaming)
Structure FF&E and personal property required for operations
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- 10 years, with five 5-year extensions at Pinnacle OpCo's option
- Causes for termination by lessor include lease payment default, bankruptcy and/or loss of gaming
licenses
- At the end of the lease term, Pinnacle OpCo will be required to transfer the gaming assets (including
the gaming licenses) to successor tenant for fair market value, subject to regulatory approval
Term and - Provisions for orderly auction-based transition to new operator at the end of the lease term if not
Termination extended
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- Year 1 rent of $377.0MM comprised of (1):
-- Fixed building rent of $289.2MM with annual escalators (subject to minimum property-level EBITDAR
rent coverage of 1.8x); plus:
-- Fixed land rent of $43.9MM; plus:
-- Percentage rent component for the facilities of $43.9MM reset every 2 years equal to 4% of the
excess (if any) of the average net revenue for such facilities for the trailing two years over a
Rent baseline
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- Pinnacle OpCo required to maintain properties and spend a minimum of 1% of net revenues on
maintenance capital (including FF&E and capitalized personal property required for operations)
annually
- Structural projects generally require GLPI consent, not to be unreasonably withheld
Capital - GLPI to provide requisite financing for future capital projects if requested by Pinnacle at terms
Expenditures mutually agreeable to both parties
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Other Lease - Obligations under the Master Lease are guaranteed by Pinnacle OpCo and certain of its subsidiaries
Related Terms - Certain rights of first offer as well as radius restrictions on competition
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Note: (1) To be updated upon finalizing a transaction based on Pinnacle's trailing 12 month net revenues
Conference Calls, Webcasts and Replay Details
Gaming and Leisure Properties will host a live conference call and simultaneous webcast today, July 21, at 9:00 a.m. ET, which will be open to the general public. The conference call number is 877-705-6003; please call five minutes in advance to ensure that you are connected prior to the presentation. Questions will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.glpropinc.com; allow 15 minutes to register and download and install any necessary software. A presentation summarizing the transaction will be available on GLPI's website. A replay of the call will be available approximately two hours after the call concludes and can be accessed for 30 days on GLPI's website.
Pinnacle management will also host a live conference call to discuss the transaction and Pinnacle OpCo today at 11:00 am ET, which will be open to the general public. The conference call number is (706) 679-7241 and the passcode is 90143810. Please call five minutes in advance to ensure that you are connected prior to the presentation. Questions will be reserved for call-in analysts and investors. During the conference call and webcast, Pinnacle management will review a presentation regarding the OpCo, which can be accessed via its investor relations website at http://investors.pnkinc.com.
This press release, which includes financial information to be discussed during the conference call and disclosure and reconciliation of non-GAAP financial measures, is also available on www.glpropinc.com or www.pnkinc.com.
