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Penn National Gaming Inc. Message Board

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  • acricketeer acricketeer Jul 27, 2007 8:47 AM Flag

    IMHO, the deal is dead

    That $200 million will go a long way, if it turns out that way. They can use it to pay down debt. They also had costs associated with this merger agreement, so it will be less than $200MM or around 2.50 per share.
    However, I think there's still a good chance the deal will go through. Here are my reasons:
    1) 11- 15 months is a long time for a deal to happen. The buyers can sit on it for awhile and see if market conditions improve.
    2) $200 MM isn't chump change, unless Penn is currently worth considerably less. Remember, Penn expects to earn around $2 in the next year, so that bottom line earnings is built into the payment.
    3) Leaving a deal would hurt Fortress' reputation. They are one of the largest private equity firms and they're only as good as their last deal. They have the financing in place, so they'd have to come up with a good reason.
    4)Casino business is growing and is somewhat recession-resistant.
    5) Real estate is valued as it works for operations. It's not like residential real estate. As long as Penn occupies it and drives revenues out of the casinos, Fortress can get good collateral through conventional bank financing.
    6) This type of private equity deal may make more sense than others in the current environment, so it might make good business sense to consummate the deal.

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