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Penn Gaming: The Hunted Becomes the Hunter?


Company now on the prowl for Las Vegas Sands', MGM's assets.

In mid-June 2007, shares of Penn National Gaming (PENN) were riding high, and existing shareholders were surely seeing triple 777s, thanks to a takeover offer from 2 private-equity firms - Centerbridge Partners and Fortress Investment Group.

After all, the firms were to pony up some $67 a share for the Pennsylvania-based gaming company. A New York Times article points out that the offer represented a more-than-30% premium for the shares.

But then the bottom fell out. In July 2008, the deal was nixed.

The news of the squashed deal wasn't all bad, however; Penn was left with a little somethin' somethin'. A press release at the time said that :

"In connection with the termination of the merger agreement, Penn National Gaming will receive $1.475 billion, which will consist of a $225 million cash termination fee and the purchase of $1.25 billion of Penn National Gaming's redeemable preferred equity due 2015, by affiliates of Fortress, affiliates of Centerbridge, affiliates of Wachovia, and affiliates of Deutsche Bank (collectively 'Equity Purchasers')."

It's been reported that the hunted has become the hunter. In fact, Bloomberg disseminated an article earlier today, detailing how Penn is now on the prowl and hoping to scoop up assets of some of the bigger-name companies - hopefully on the cheap.

If you ask me, odds are Penn could be sitting in the catbird seat once the dust settles if it's able to belly up to the bar and pick up promising facilities at a cut rate.

Think about the situation. MGM Mirage (MGM) -- which is clearly one of the 800-pound gorillas of the gaming business -- is going through some difficult times, thanks to problems with its City Center project and the economy in Sin City. As a result, there's a feel that the behemoth could be unloading some of its properties.

Meanwhile, Las Vegas Sands (LVS) has seen better days. There's a chance it could end up unloading some assets, which, theoretically, Penn could pounce on.

But my bet isn't just on Penn when it comes to bottom-fishing properties. I think investors should keep an eye on Wynn (WYNN), which is headed by gaming legend Steve Wynn, who knows the gaming business (and particularly, Las Vegas) like the hair on the back of his hand. The aforementioned Bloomberg article also points out the following comments from Wynn in a past interview: "We keep a quarter of a billion in case something good comes up, we keep money on the side in addition to that."

It would be tough to muscle Wynn out of a deal if Steve has his eye on it.

WYNN has some other things going for it, including an enviable presence in Vegas and in Macau. The bulls will also point out that unlike some of its brethren, its expected to end this year and next in the black.
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