Finance Institutional Investment
$8.9B Penn Gaming Merger Crumbles
July 3, 2008
By: Barbra Murray, Contributing Editor

After spending the last few months attaining all the requisite approvals from various gaming commissions and boards, Penn National Gaming has put the kibosh on its proposed $8.9 billion merger with PNG Acquisition Company Inc., an entity involving funds managed by Fortress Investment Group L.L.C. and Centerbridge Partners L.P. affiliates.

News of the deal's demise comes just one month after Wyomissing, Pa.-based Penn National announced the extension of the merger agreement's end date from June 15 to October 15 of this year. As per terms of the agreement, PNG would have shelled out $67 per Penn National share for a total of $6.1 billion, and it would have assumed the gaming and racing facility company's debt of $2.8 billion.

Penn National cited a few reasons for pulling out of the merger, including the fact that the company had determined the deal would not be able to close without a substantial amount of litigation. Additionally, Penn Gaming decided that a re-negotiated acquisition price was unacceptable. The company's stock opened today at $22.52, a price far below the 52-week high of $62.30.

As a result of the deal's discontinuation, Penn National will walk away with nearly $1.5 billion. The sum involves a $225 million cash termination fee and $1.25 billion from the sale of redeemable preferred stock to Fortress and Centerbridge. Penn National plans to use the proceeds from the transaction termination to pursue opportunistic endeavors.

Presently, Penn National's portfolio of gaming and racing facilities encompasses 19 properties with approximately 1,880 hotel rooms and over 930,000 square feet of gaming floor space in 15 jurisdictions in the U.S. and Ontario, Canada. Based in New York City, Fortress is a global alternative asset manager with $34.2 billion in assets under management as of the close of the first quarter. Centerbridge, also headquartered in New York City, is a $3.2 billion private investment fund.

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