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Penn National Gaming Inc. Message Board

  • jlinge69 jlinge69 May 16, 2008 3:48 PM Flag

    Watch the options, Watch the State Approvals!!

    As I posted previously, the worry on the street is the state approvals. They seem to be behind schedule, given that the deal is suppose to close within 30 days. Today's news show that there are still five states that have not approved the deal yet!! That is why the stock is under pressure. The JUL 60 calls are interesting. There has been a small accumulation in these calls, with over 10,000 contracts open by the end of the day. Remember, the hedgies will buy the options, while the funds will buy the stock.

    Some random responses to various posts. Nobody has backed-up the truck since we have not seen any meaningful volume increases. WC and DB would have legal issues if part of their organizations bought the stock at this time because of insider trading concerns. The financing part of the banks do not have any authority to buy securities, so another part of the bank would have to buy the shares and this would look suspicious and possibly be illegal. FIG and CB are not buying shares themselves because they are still attempting (hopefully) to raise the necessary equity to close the deal. It is possible that other parts of FIG and CB are buying shares, but not in volume yet. There is not much excess liquidity in the private equity markets right now, although that is starting to slowly change for the better. As for a lower priced deal, this could not happen because it would cause a change of the deal and therefore, give the banks a legal reason to walk away, would require new shareholder approval and give FIG and CB a reason to walk away from the deal and avoid the $200 mil penalty and the "performance" liabilities. No way this deal is repriced! It eithers goes as is or is litigated! Wall Street is obviously betting on the litigation scenario, but Wall Street is often wrong!

    In my opinion, this is a tough deal for FIG and CB to walk away from. One, it would cause an expensive legal headache and be a big distraction to the companies, second, PENN's cash flow is as good or better than ist was a the time of the deal and with all of the new projects coming on line over the next few years, cash flow will only get better, three, FIG and CB see PENN as the low cost entry way into Vegas and Atlantic City (see recent proposal on Atlatic City property, which was made after the buyout was announced) and this has only gotten better since the deal's announcement, four, FIG and CB have said on record very recently that they committed to the deals (raises legal issues if not true), five, the banks involved have recently reserved lossed for "pending" loan commitments, six, the PENN executive team has a lot to lose if the deal does not go through because of the "change of control" tax moves they did in December, 2007, and finally, the deal is very target friendly and the loan commitments are borrower friendly.

    Watch the states and the options!!!

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    • I think the approvals are nothing more than a legal formality; that is, they are almost a sure thing.

      • 1 Reply to jcbrowns
      • re. "I think the approvals are nothing more than a legal formality; that is, they are almost a sure thing."

        That's probably so, assuming they got all the t's crossed and the i's dotted in their application.

        The Iowa meeting is waiting for a report on the character of FIG and its principals. I suppose they're doing a routine check for mobsters and the like. You can be sure that a big publicly-traded company like FIG will come out squeaky clean.

    • approvals are not the concern.

      financing is concern.

      • 2 Replies to sal2207
      • I agree that approvals are not a concern. In the proxy statement there is a provision for a 120 day extension if necessary to put approvals in place. The approvals are not a concern. The banks are not a concern. FIG is the only wild card. Are they thinking they overpaid and will try to get a price cut? I really dont know. A lot of message board posters, with good, well thought arguments, have been both pro and con, on this issue. IMO based on EPS, the deal doesnt appear to have $67 per share value. However if you look at EBITDA, FIG can pay the interest on the debt pretax and still earn a few bucks at todays earnings. If earnings improve, they will make decent money. Although they might have some buyers regret about price, IMO it is still a good deal and the downside to walking in reputation and money would lead us to think the deal gets done. Pay your money take your chances.

      • i disagree. after CCU the banks will have to fund. There are many large holders including Peterbilt Carlino who will sue for performance. Lazard also has a stake in the deal. They will be paid 20 million if the deal goes through. The issue is FIG and the 200 million walkaway fee. Too much money at stake for banks to weasal out of deal completely. Price cut maybe. Walkaway by FIG a big maybe. not funding-----expensive unwinnable lawsuit for Wachovia and Deutsche banks.

    • I understand the Illinois hearing is on the docket for Monday the 19th. Whether approval will come forthwith or there will be a delay, I do not know. Then there are seven others, may be a busy few weeks coming up.

    • Sorry about the typos in the last paragraph.

      • 1 Reply to jlinge69
      • YOU DONT HAVE TO BE SORRY. Everything is as you noted. (but I rather sssshhhhhhhh! or we might give some shorts and mnipulators nightmares. Still time to accumulate before the shorts will have to give in to reality. (Same thing the shorts tried when FIG did the buyout of the rail co. Disbelief till the very last second, almost.)

 
PENN
10.94-0.41(-3.61%)Jul 24 4:00 PMEDT

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