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Penn National (PENN) to Buy Hollywood Casino Perryville

Zacks.com logo Zacks.com 12/16/2020

In a bid to reinforce its presence in the Maryland gaming market, Penn National Gaming, Inc. PENN recently entered into an agreement with Gaming and Leisure Properties, Inc. GLPI for the acquisition of Hollywood Casino Perryville operations for $31.1 million. Following the announcement, shares of the company gained 5.1% during trading hours on Dec 15.

Moreover, Penn National announced that it will enter into a lease agreement with Gaming and Leisure Properties for the real estate assets associated with the Hollywood Casino Perryville. Following the closing of the transaction (subject to working capital adjustments), the lease is likely to have an initial term of 15 years (with four 5-year extensions) with an estimated annual rent of approximately $7.77 million.

Meanwhile, president and CEO of Penn National, Jay Snowden stated, “Penn National is excited to acquire the operations of Hollywood Casino Perryville, a property we developed in 2010, which will allow us to re-enter the strong Maryland gaming market and add a twentieth gaming jurisdiction to our leading nationwide footprint.”

Also, the recent approval of sports betting in Maryland makes it ideal for the company to expand its omni-channel platform coupled with Barstool-branded retail sportsbook and mobile app.

Nonetheless, both transactions are expected to close in mid-2021, subject to the approval of the Maryland Lottery and Gaming Control Commission and other customary closing conditions.

Continual Acquisitions to Drive Growth

Penn National is known for its acquisition strategies that help the company expand its presence and improve revenue yields.

In the first quarter of 2019, the company acquired two category 4 licenses in the bidding process in Pennsylvania. Each license can have up to 750 slot machines and 40 table games. Meanwhile, the company’s other notable buyouts include Margaritaville Resort Casino in Bossier City, LA, in January 2018 and Pinnacle Entertainment, Inc. in October 2018. With the Pinnacle acquisition, the company added 12 new properties to its portfolio.

Price Performance

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Coming to price performance, shares of Penn National have surged 225% so far this year compared with the industry’s 1.8% growth. Notably, the company has been benefiting from its expansion initiatives and cost-saving efforts. Going forward, the company remains confident about its long-term prospects, on the back of its differentiated omnichannel approach. Also, partnership with Barstool Sports is likely to drive revenues during the upcoming periods.

However, the coronavirus pandemic has dramatically reduced travel and demand for casino gaming and related amenities. If the virus is not contained, further chances of temporary suspension of operations cannot be ruled out.

Penn National — which shares space with MGM Resorts International MGM and Red Rock Resorts, Inc. RRR in the Zacks Gaming industry — has a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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