Timothy J. Wilmott, Penn National’s Chief Executive Officer, stated Tuesday, “We are pleased to partner with VICI Properties Inc. to structure this tuck-in acquisition of Bossier City’s newest casino resort, which is consistent with our criteria for transactions that are accretive to free cash flow, strategically diversify our revenue and operating base, and present well-defined paths to the realization of significant synergies. With a purchase multiple of 5.5x trailing twelve months adjusted earnings before interest, taxes, depreciation, amortization, and management fees which we believe declines to below 5.0x with synergies, Penn National believes this transaction further supports our efforts to enhance shareholder value.”
Simultaneous with the closing of the transaction, Penn National will enter into a triple net lease agreement with VICI Properties Inc. (NYSE: VICI) (“VICI”) for the Margaritaville facility. The lease will have an initial annual rent of approximately $23 million and an initial term of 15 years, with four 5-year renewal options. The rent coverage ratio in the first year after closing is expected to be 1.9x and the Tenant’s obligations under the lease will be guaranteed by Penn National.
The proposed transaction will further expand Penn National’s regional gaming platform with a property that is complementary to its pro-forma operating base following the completion of the Company’s pending acquisition of Pinnacle Entertainment, Inc. (NASDAQ: PNK) (“Pinnacle”). Upon closing the Margaritaville transaction and the pending Pinnacle transaction (and taking into account announced divestitures), Penn National’s portfolio of regional gaming facilities will increase to 40 properties in 18 jurisdictions.
Penn National does not anticipate that this transaction will alter the Company’s expectation that it will end the year with net rent-adjusted leverage in the mid-5x range, pro forma for the completion of the Pinnacle acquisition.
Built in 2013, Margaritaville Resort Casino is the premier venue for gaming, lodging, dining and entertainment experiences in Northern Louisiana. The property features 26,500 square feet of casino space, 395 hotel rooms, an island-style escape theme, 6 restaurants and food and beverage outlets, a 15,000 square foot 1,000-seat theater and 9,500 square feet of meeting space. Margaritaville Resort Casino generated adjusted EBITDAM of approximately $44 million for the twelve month period ended March 31, 2018.
The transaction, expected to close in the second half of 2018, is subject to the approval of the Louisiana Gaming Control Board and other customary closing conditions.
About Penn National Gaming
Penn National Gaming owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. At March 31, 2018, the Company operated twenty-nine facilities in seventeen jurisdictions, including California, Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario, Canada. At March 31, 2018, in aggregate, Penn National Gaming operated approximately 36,100 gaming machines, 810 table games and 4,800 hotel rooms. The Company also offers social online gaming through its Penn Interactive Ventures division.