Penn National buys 50 percent stake in Texas racetrack operation

HOUSTON, Texas -- Penn National Gaming announced Wednesday it was forming a joint venture partnership with Texas racetrack operator Sam Houston Park which will give the regional casino operator 50 percent interest in two tracks and a planned track.

Financial terms were not disclosed but Wall Street viewed the move as a preemptive strike should Texas move to legalize slot machines or full-scale gaming at the state's racetracks.

"Texas represents the largest untapped gaming market in North America," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors. "While the Texas legislature will not revisit slots-at-the-track legislation until the fall of 2011 legislative session, we believe there is currently more momentum behind passing such legislation than at any other point in the state's history."

The transaction gives Penn National, which operates racetrack casinos in Pennsylvania and West Virginia, ownership in the 323-acre Sam Houston Race Park in Houston and the 80-acre at Valley Race Park, a dog-racing facility in Harlingen. Penn National would also have the option to buy 135 acres for a planned racetrack in Laredo.

The Joint venture is subject to final approval from the Texas Racing Commission.

"This transaction is another step in Penn National's long-term strategy to diversify its pari-mutuel operations and grow its presence in key markets by acquiring or investing in assets that can benefit from the placement of gaming devices," company Chief Executive Officer Peter Carlino said in a statement.