Casino stocks rose Friday on news that casino and racetrack owner Penn National Gaming will be taken private by two buyout firms for $6.1 billion. Fortress Investment Group and Centerbridge Partners will pay Penn National shareholders $67 in cash per share, 31% above the company's Thursday close of $51.14. The transaction also involves $2.8 billion in assumed debt. The deal follows the acquisition of world-leading casino operator Harrah's Entertainment by private equity firms for $17 billion and the $5.4 billion management-led buyout of Station Casinos. The prospect of more potential buyouts sent shares of Pinnacle Entertainment up 8.25% to $30.83 and MGM Mirage up 4.23% to $85.70, among other sector gainers. Akre Capital Management, Penn National's biggest shareholder with an 8.7% stake, has not yet decided if it will back the bid. According to JP Morgan analyst Harry Curtis, the final pricetag for Penn National will likely be 10-20% above the current offer. In related news, Standard & Poor's has lowered its corporate credit rating on Penn National to "BB-" from "BB" following news of the buyout.
Sources: Press release, Bloomberg, Chron.com, Reuters, TheStreet.com, Forbes
Commentary: Six Racetracks Worth Betting On • A Quick Guide to the Major Gambling Stocks • Cramer's Take on PENN
Stocks/ETFs to watch: Penn National Gaming, Inc. (PENN). Competitors: MGM Mirage (MGM), Pinnacle Entertainment, Inc. (PNK), MTR Gaming Group Inc. (MNTG)
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