Pinnacle's $4.7B casino sale faces challenge at Indiana hearing

November 11, 2015

Pinnacle Entertainment Inc.’s proposed sale of its casinos to Gaming & Leisure Properties Inc. is being opposed by a union that will ask the Indiana Gaming Commission to reject the plan, saying the deal would give the company more casinos than state law allows.

Gaming & Leisure owns a casino in Lawrenceburg, and Pinnacle owns two, in East Chicago and Florence, according to a copy of prepared remarks to be given by Unite Here research analyst Noah Carson-Nelson and provided by the union. Indiana law limits casino owners to two properties in the state.

Las Vegas-based Pinnacle said in July it would sell its 14 casinos to Gaming & Leisure in a transaction valued at $4.75 billion, including debt. The deal is one of several in which casino operators sell properties or convert them into real estate investment trusts, which can trade at higher stock market values because they don’t pay federal income taxes.

Neither Pinnacle, nor a spokeswoman for the commission, returned calls and e-mails seeking comment. The commission meets Thursday at 1 p.m. in the Auditorium at the Indiana Government Center South Building in Indianapolis.

Unite Here is involved in a long-running contract dispute at Pinnacle’s East Chicago casino, according to a union website. Gaming & Leisure, as a REIT, serves as landlord for casinos that are operated by others.

The union said Gaming & Leisure in Indiana received a “suppliers license,” normally reserved for companies that provide goods and services to casinos, when it was spun off from Penn National Gaming Inc. in 2013. That may be the basis for the company’s argument to be exempt from the two-casino limit.

“Given its level of control, licensing GLPI as a supplier is not just an absurdity,” the union said in its testimony. “It also sets a dangerous precedent just as other national gaming companies are considering creating their own REITs and leasing their properties to captive or third-party operators.”

Gaming & Leisure responded by saying the deals with Penn National and Pinnacle keep the casino operator as the license holder.

“Unite Here is simply trying to manufacture obstacles with complete disregard for the facts or clear interpretation of applicable law,” Bill Clifford, Gaming & Leisure’s chief financial officer, said in an e-mail.

Unite Here represents about 275,000 hospitality workers nationally, about a third of them in casinos. It has also opposed the merger with Missouri regulators and with the U.S. Federal Trade Commission.

Pinnacle said on Oct. 15 that it received approval for the transaction from authorities in Mississippi and had applications on file with six remaining state regulators.


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