Federal Trade Commission Signs Off Penn National $2.8 Billion Pinnacle Takeover on Condition of Casino Divestiture to Boyd
The US Federal Trade Commission (FTC) this week rubberstamped Penn National Gaming’s (PNG) proposed $2.8 billion acquisition of Pinnacle Entertainment, a transaction that will cement PNG’s status as America’s biggest regional gaming operator.
On completion, the Pennsylvania-based company’s portfolio will boast 41 casino properties. It will operate around 53,500 slots and 1,300 table games, and own 8,300 casino hotel rooms in 20 jurisdictions across the US.
The FTC approval is contingent on the sale of four properties to Nevada-based Boyd Gaming avoid to antitrust issues — the Ameristar Kansas City and the Ameristar St. Charles in Missouri, the Belterra Casino in Indiana, and Belterra Park in Ohio.
Thus, PNG will acquire 12 of Pinnacle’s 16 properties, expanding its footprint in Iowa, Mississippi, Missouri, Colorado, Louisiana, Nevada, and Pennsylvania.
Too Big in Missouri
Antitrust or competition laws regulate companies to protect market competition for the benefit of consumers. Among other things, it’s the FTC’s job to prevent the creation of monopolies or near-monopolies — companies that are too dominant within one market — through mergers or acquisitions.
PNG already operates two casinos in Missouri, plus one just across the border in Kansas City, Kansas, and would have acquired three more from Pinnacle. There were also similar issues surrounding concentration of ownership in Indiana and Ohio.
Anticipating a possible fly in the ointment, PNG and Pinnacle arranged in 2017 to sell the four properties to Nevada-based Boyd for $575 million.
Even so, the FTC made PNG and Pinnacle sweat a little. In March, the commission took the relatively unusual step of issuing a second request for information to both companies.
Since this only occurs in around two percent of cases, it suggested the FTC had serious concerns about the deal, leading to speculation it was about to demand further divestiture of properties before giving approval — or, worse still, nix it completely.
The deal was further complicated by the fact that both companies house their properties in the same real estate investment trust (REIT), Leisure and Gaming Properties. The investment vehicle was created by PNG as a spin-off company in 2013.
Fears proved to be unfounded. Despite the delay, both companies still expect the transaction to be finalized within the original Q4 timeframe,
The complex deal also required sign off from regulators in each of the 14 states in which Pinnacle operates. The completion of the acquisition is now contingent on the approval of just one jurisdiction, Nevada.