NEW YORK (TheStreet) -- Shares of Pinncale Entertainment (PNK) - Get Pinnacle Entertainment Inc Report were gaining 18.5% to $32.49 Monday after Gaming and Leisure Properties (GLPI) - Get Gaming and Leisure Properties, Inc. Report offered to acquire the casino operator's real estate assets.
Under Gaming and Leisure Properties' plan Pinnacle Entertainment shareholders will receive one share of Pinnacle's operating business, which will be spun off from the company, and 0.5517 shares of Gaming and Leisure Properties, which will include Pinnacle's real estate assets, for each share of Pinnacle they own. The transaction, including debt, has an enterprise value of about $4.1 billion.
As part of the deal the spun-off operating business of Pinnacle would enter into a master lease agreement with Gaming and Leisure Properties to use the real estate involved in the deal.
The deal is expected to close in late 2015, if it is accepted by Pinnacle.
TheStreet Ratings team rates PINNACLE ENTERTAINMENT INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PINNACLE ENTERTAINMENT INC (PNK) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and unimpressive growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PINNACLE ENTERTAINMENT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PINNACLE ENTERTAINMENT INC turned its bottom line around by earning $0.63 versus -$2.28 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $0.63).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The change in net income from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income has decreased by 3.1% when compared to the same quarter one year ago, dropping from $15.01 million to $14.55 million.
- The debt-to-equity ratio is very high at 13.78 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full analysis from the report here: PNK Ratings Report