Pinnacle unlocks value through Ameristar acquisition



Acquisition overview

In August 2013, Pinnacle Entertainment (PNK) completed the acquisition of Ameristar Casinos in a transaction valued at about $2.8 billion including assumed debt. PNK expected the purchase to be immediately accretive to the company’s free cash flow and earnings per share.

As a result of the Ameristar transaction, PNK added eight properties. At present, Pinnacle Entertainment operates 15 properties in nine states.

The graph above shows how the Ameristar acquisition almost doubled PNK’s revenues on a consolidated basis. PNK raised debt capital to do the following things:

  • finance the aggregate cash consideration for the Ameristar purchase
  • refinance PNK’s and Ameristar’s existing credit facilities
  • pay transaction-related fees and expenses
  • provide working capital

Other noteworthy casino deals that happened in 2013 include the acquisition of WMS Industries by Scientific Games (SGMS) and the purchase of Shuffle Master by Bally Technologies (BYI). To learn more, read Why casino operators look for industry consolidation.

ETFs like VanEck Vectors Gaming (BJK) and the Consumer Discretionary Select Sector SPDR Fund (XLY) help investors gain access to companies in the leisure industry.

The graph above shows that PNK’s share price after the completion of the merger had given a return of 2.8% as of December 8, 2014.

PNK management’s take

Pinnacle Entertainment CEO Anthony Sanfilippo commented, “With this transaction, we have doubled the size of our company. . .We now move forward in a collaborative manner with a clear focus on achieving a seamless integration, maximizing the synergies between these two complementary asset portfolios, and unlocking the value that is created by this much larger company. Pinnacle is well-positioned for a bright future, offering an even more efficient company with sustainable long-term value for our stakeholders.”

Carlos Ruisanchez, president and CFO of PNK, said, “We are optimistic and excited about the benefits that this fortified platform will provide our combined company, including lower risk through increased operational and financial diversification as well as a lower cost of capital and benefits from synergies and efficiencies of scale.”

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