Penn National’s plan to buy Argosy OK’d

Megan Reichgott

Friday, Sept. 30, 2005 | 11:25 a.m.

CHICAGO -- The Illinois Gaming Board on Thursday approved casino operator Penn National Gaming Inc.'s $2.2 billion plan to buy rival Argosy Gaming Co., but as a condition two Illinois casinos have to be sold.

Under the agreement, approved by a 5-0 vote, Penn National must sell Argosy's casinos in Alton and Joliet by Dec. 31, 2006 -- a move that prevents Penn National from having more than one casino in the lucrative Chicago market.

Penn National corporate counsel, Cezar Froelich, said company officials were not happy with having to sell the Alton Belle Casino and Empress Casino Joliet, but they wanted to complete the deal. The merger is expected to close by Monday.

"We'd prefer not to sell any of them," Froelich said. "The deal was to get the merger, we had to sell."

The sale of the Joliet casino was key to the deal, Froelich said. Last month, the board delayed a vote scheduled for Aug. 25, apparently because of fears that Penn National already owned a property in the Chicago-area market, Hollywood Casino Aurora.

Illinois Gaming Board Chairman Aaron Jaffe called the process leading to the agreement "a long and arduous journey," but said board members think they have a deal that's fair to all parties.

"The board has worked very diligently on this ... we do come from different worlds, we do have different viewpoints," Jaffe told Penn National officials during a board meeting that took place before Thursday's vote.

Wyomissing, Pa.-based Penn National operates horse racing facilities, off-track betting centers and casinos in the U.S. and Canada. Now that the board has approved the deal, Penn National has more than $2 billion in annual revenue, more than 20,000 slot machines and about 700,000 square feet of casino space.

Alton-based Argosy operates casinos in Illinois, Missouri, Louisiana, Iowa and Indiana.

The deal already was authorized by regulatory agencies in all the areas in which Penn National and Argosy operate, as well as the Federal Trade Commission. The approval from the gaming board was the final regulatory hurdle Penn National needed to complete the acquisition.

Penn National announced last November that it would acquire Argosy for $47 per share -- a 15 percent premium to Argosy's closing price before the deal was unveiled. In addition, Penn National will assume $805 million of Argosy's long-term debt. Argosy shareholders approved the deal in January.

Argosy's stock rose 1 cent on Thursday to close at $46.97 on the on the New York Stock Exchange. Penn National shares rose 30 cents, or .96 percent, to _$31.60 in after-hours trading on the Nasdaq Stock Market.