The offer of $67 a share for Penn National's stock represents a 31% premium more than the closing price of $51.14 a share at the end of trading on the Nasdaq on June 14. By the close on Friday, June 15, shares had shot up more than 21% to $62.12 a share.

The deal allows Penn National to solicit rival bids for 45 days. According to a published report, a research note from a JP Morgan Securities analyst suggests Penn National could sell for as much as $80 a share.

The offer represents another chapter in private equity's continuing interest in betting on casinos. This April, Harrah's shareholders approved a $17.1-billion offer by a partnership between Apollo Management Group and Texas Pacific Group. http://www.globest.com/news/878_878/gsrwest/159550-1.html Less than two month's earlier, Station Casinos entered into an $8.8-billion buyout agreement with Fertitta Colony Partners, http://www.globest.com/news/850_850/gsrwest/158333-1.html and, as GlobeSt.com also reported, Trump Entertainment Resorts is entertaining the idea of being acquired. http://www.globest.com/news/909_909/newjersey/160773-1.html

Penn National's board has deemed the Fortress/Centerbridge offer fair and in shareholders' best interest and recommends their approval. In a statement, Peter Carlino, CEO, says the board's action "underscores our 13-year commitment to consistently generate value for our shareholders. Fortress and Centerbridge are both leading private equity firms with proven track records and strong reputations."

This May, Fortress entered into an agreement to pay $3.5 billion to acquire Jacksonville, FL-based Florida East Coast Industries, which is owned by Flagler Development Group and Florida East Coast Railway LLC. http://www.globest.com/news/901_901/jacksonville/160466-1.html New York City-based Fortress has approximately $36 billion in assets under management, and Centerbridge is a $3.2-billion investment fund also based in New York City.

Under the agreement, Carlino, SVP, CFO William Clifford, EVP of operations Leonard DeAngelo and other members of the current corporate team and property-level personnel will remain in place, and the company would go private. The transaction requires approval by the Federal Trade Commission and state gaming and racing authorities as well as shareholders.

The transaction is expected to close within 12 to 16 months. It does not contain a financing condition, and if it is not completed by June 15, 2008, the per-share price will increase by $0.0149 a day.

Penn National operates 18 facilities in 13 US states and Ontario. In all, its facilities encompass nearly 23,000 slot machines and more than 400 table games in 808,000 sf of gaming floor space along with 1,731 hotel rooms. For the full year ended March 31, it generated net revenues of $2.3 billion.

Penn National is advised by Lazard and the New York law firm of Wachtell, Lipton, Rosen & Katz in this transaction. Willkie Farr & Gallagher LLP is legal advisor, and Deutsche Bank and Wachovia are advisors and financial sources for Fortress and Centerbridge.

Instant Insights /

Penn National Agrees to Sell for $8.9B

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