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Churchill Downs to Acquire Peninsula Pacific Entertainment Assets

·3 min read

Churchill Downs Inc. (NASDAQ:CHDN) said on Tuesday that it has entered into a definitive purchase agreement to acquire substantially all of the assets of Peninsula Pacific Entertainment LLC, which operates under the P2E label, for $2.485 billion.

The racing, online wagering and gaming entertainment company will acquire P2E's assets in Virginia and New York as well as the operations of its Sioux City casino property. The transaction is dependent on usual and customary closing conditions, including the company obtaining approvals from the Virginia Racing Commission, the New York State Gaming Commission and the Iowa Racing and Gaming Commission, according to the press release. The deal is expected to close by the end of 2022.

This unique set of assets expands our geographic footprint and provides additional scale, said Bill Carstanjen, CEO of Churchill, in a statement. P2E has done an exceptional job developing and managing this collection of assets, which we are very excited to acquire and plan to strategically grow in the years ahead.

Churchill will acquire Colonial Downs Racetrack, a thoroughbred racing facility in New Kent, Virginia, as well as six successful and growing Rosies Gaming Emporium historical horse racing facilities across Virginia. Rosies Gaming Emporium locations currently include Collinsville, Dumfries, Hampton, New Kent, Richmond and Vinton. The facilities currently have approximately 2,700 historical racing machines.

The transaction significantly expands the geographic diversity of Churchill's live and historical racing entertainment venues and reinforces Churchills role as a national leader in historical horse racing.

Churchill will also acquire the Del Lago Resort and Casino in Waterloo, New York, as well as the operations of Hard Rock Hotel and Casino in Sioux City, Iowa.

Under the terms of the transaction, P2E is expected to reach a definitive agreement to sell the real property associated with Hard Rock Sioux City to a third party. Churchill will acquire the operating company and lease the Sioux City Property from that third party. Following the closing, Churchill will operate Hard Rock Sioux City and lease the Sioux City Property pursuant to lease terms negotiated prior to the closing. In the event P2E is unsuccessful in reaching a definitive agreement with a third party to purchase the Sioux City Property by a certain date, the Sioux City Property will be included in the P2E Transaction and the total consideration will increase to $2.75 billion, the release noted.

Under Virginia law, Churchill will have the opportunity to develop up to five additional historical racing entertainment venues in Virginia with collectively up to approximately 2,300 additional HRMs. As part of the P2E Transaction, Churchill will also acquire the rights to build a large gaming resort, with up to 1,800 HRMs in Northern Virginia. P2E previously announced plans to invest up to $400 million to build the initial phase of the Dumfries Project, which is scheduled to open in 2023.

Churchill will also acquire the rights to develop Rosies Gaming Emporium in Emporia, the seventh historical racing entertainment venue under P2Es Colonial Downs license. The Emporia facility, located along I-95 near the North Carolina border, will have 150 HRMs and is expected to open in 2023.

Included in the P2E Transaction are the rights to P2Es ongoing effort in partnership with Urban One to develop ONE Casino + Resort, a $565 million destination casino in Richmond, Virginia.

P2Es gaming license in the State of Louisiana, and its casino development rights in Cedar Rapids, Iowa, are not included in the transaction.

This article first appeared on GuruFocus.