Gaming and Leisure Properties May Sell as Much as $600M in Stock, Could be Used For Deals

Posted on: August 15, 2019, 10:58h. 

Last updated on: August 16, 2019, 12:49h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming and Leisure Properties, Inc. (NASDAQ:GLPI), the real estate investment trust (REIT) that owns more than 40 casinos across the US, said it could sell up to $600 million of its stock and that proceeds from those sales could be used to fund acquisitions.

The gaming area at GLP’s Tropicana Atlantic City. GLP could be looking to buy more casinos. (Image: PlayNJ.com)

The company announced the plan in a filing with the Securities and Exchange Commission (SEC), noting that share sales will occur from “time to time” on the open market and potentially through privately negotiated transactions.

Proceeds from the share sales are expected to be dedicated to general corporate activities, including funding potential acquisition opportunities, repaying outstanding indebtedness, including our senior unsecured credit facilities, and for other general corporate and working capital purposes,” said Gaming and Leisure in the filing.

GLP currently has 215.06 million shares outstanding. Secondary offerings, such as the one the REIT is announcing, are often dilutive to current investors because those sales add to the number of shares freely floating in the market. As such, companies that announce secondaries usually see their stock prices decline on the news. At this writing, shares of GLP were lower by just 0.24 percent.

Not Surprising

Gaming and Leisure raising capital to possibly pursue deals isn’t surprising. On the company’s second-quarter earnings conference call last week, chairman and CEO Peter Carlino said his company is “following the bread truck” as it pertains to Eldorado Resorts, Inc.’s (NASDAQ:ERI) $17.3 billion takeover of Caesars Entertainment Corp. (NASDAQ:CZR), a deal that has already spurred eight asset sales and is widely expected to result in more.

Penn National Gaming (NASDAQ:PENN), from which GLP was spun off in 2013, is the REIT’s largest tenant. But the real estate company owns some properties that are managed by other operators, including a pair run by Eldorado.

Carlino did not specify a market in which his company would be focusing for deals, nor did the SEC filing pinpoint a specific region where GLP could go shopping. The company is, however, light in two of the largest US gaming destinations, owning just two properties in Atlantic City and Las Vegas – the Tropicana on the Boardwalk and the M Resort Spa Casino in Sin City.

Assuming GLP sells $600 million worth of stock and decides to use that entire sum for acquisitions, that cash pile probably wouldn’t be enough to land a high end Strip venue. But based on recent sales prices, it would certainly be enough to command multiple casinos in smaller markets.

The Cosmopolitan on the Strip could fetch up to $4 billion when sold, according to some reports, while MGM Resorts International (NYSE:MGM) could garner $6 billion to $7 billion before taxes if it sells both the Bellagio and MGM Grand.

Conversely, Eldorado recently announced the sales of two casinos – one in Mississippi and another in Missouri – for just $230 million.

Legal Speak

GLP was careful to note that the share sales are not guarantees of future acquisitions, and that its ability to do deals hinges on the availability of suitable purchases.

In the filing, the company warned investors that “the availability of and the ability to identify suitable and attractive acquisition and development opportunities and the ability to acquire and lease the respective properties on favorable terms” is critical to any deal-making strategy.