Penn National to buy Argosy for $1.4 billion

/ Source: The Associated Press

Penn National Gaming Inc. is acquiring Argosy Gaming Co. for $1.4 billion cash in an effort to turn itself into the nation's third-largest operator of gambling properties.

Penn National, based in Wyomissing, Pa., said Wednesday it will pay $47 per share for Argosy stock — a 15 percent premium to Argosy's closing price of $40.75 per share before the deal was announced. Penn National will also assume $805 million of Argosy's long-term debt.

In extended trading, Argosy shares surged $5.16, or 12.7 percent, to $45.91 on the New York Stock Exchange. Penn National shares were also up 12.8 percent in the late session at $46.75 on the Nasdaq Stock Market.

Argosy, based in Alton, Ill., owns and operates casinos in Illinois, Missouri, Louisiana, Iowa and Indiana. It reported net revenues of about $1 billion for the 12 months ending Sept. 30 and earnings before interest, taxes and depreciation of $260 million.

If the deal is approved by regulators and Argosy stockholders, Penn National would have more than $2 billion in annual revenues, more than 20,000 slot machines and about 700,000 square feet of casino space at 13 properties.

Only casino giants MGM-Mirage Inc. and Harrah's Entertainment Inc. would be larger.

Penn National CEO Peter M. Carlino said the merger gives his company a presence in nearly every regional gambling market. The company owns a West Virginia racetrack and casino as well as properties in Mississippi, Louisiana, Colorado and Illinois.

"Both companies have excellent, long-term records of growth ... and both entities have proven their ability to identify growth and expansion opportunities, which create exciting entertainment destinations and value for shareholders," Carlino said late Wednesday.

The deal would double Penn National's revenues and gives the company the ability to further diversify.

Argosy CEO Richard J. Glasier said the deal is good for stockholders and employees.

"We are confident that our properties will continue to generate impressive operating results as part of the Penn National platform," he said.

The sale is expected to close in the second half of 2005.