Penn National Gaming on Wednesday announced an agreement to acquire the Tropicana Las Vegas
The Strip hotel-casino on 35 acres at Tropicana Boulevard will be purchased for $360 million from its shareholders, the largest of which is a partnership between Onex and Alex Yemenidijan.
It’s the largest acquisition for the company since its 2011 purchase of the M Resort in Henderson.
“The planned acquisition of Tropicana Las Vegas establishes a strong presence on the Las Vegas Strip for Penn National Gaming, fulfilling an important long-term strategic objective for the Company,” company CEO Timothy Wilmott said in a statement.
The Pennsylvania-based company owns 26 facilities in 17 jurisdictions, including Florida, New Jersey and Nevada.
A two-phase plan to complete the transaction will occur over the next three to five years, Wilmott said.
The first phase will include $20 million in facility improvements and integration activities, like Penn National’s soon-to-launch nationwide loyalty program. Phase two will add retail space to the casino and potentially additional hotel rooms. The budget has yet to be determined.
“The property will also benefit from its proximity to the new 20,000-seat capacity MGM-AEG Arena scheduled to open in mid-2016,” the Penn statement said.
Penn will fund the acquisition by expanding its existing credit agreements and cash on hand.
“At first pass, the deal makes strategic sense to us and looks reasonably financially sound if Penn can turn the asset around,” Wells Fargo Securities said in a statement.
Wells Fargo also mentioned Tropicana’s 1,000 gaming tables and slot machines, prime location and recent $200 million in upgrades to its 1,500 guest rooms over the last four years, saying, “We believe Penn’s operational excellence can bring the asset to at least $20 (million) of future EBITDA (cash flow).”
In 2014, the hotel had an 89 percent occupancy rate and casino revenue was up 7 percent to $41.1 million.
Penn’s acquisition of the casino is “somewhat of a surprise,” Deutsche Bank said in a statement. But it fulfills the company’s longtime goal of establishing a Strip presence.