Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2020

Greektown Casino-Hotel

On May 23, 2019, the Company acquired all of the membership interests of Greektown Holdings, L.L.C., for a net purchase price of $320.3 million, after working capital and other adjustments, pursuant to a transaction agreement among the Company, VICI Properties L.P., a wholly-owned subsidiary of VICI, and Greektown Mothership LLC. In connection with the acquisition, the real estate assets relating to Greektown Casino-Hotel (“Greektown”) were acquired by a subsidiary of VICI for an aggregate sales price of $700.0 million, and the Company entered into the Greektown Lease, which has an initial annual rent of $55.6 million and an initial term of 15 years, with four five-year renewal options. The acquisition of the operations was financed through a combination of cash on hand and incremental borrowings under the Company’s Revolving Credit Facility.

During the first quarter of 2020, the Company finalized the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill, as follows:



(in millions)	Fair value
Cash and cash equivalents	$	31.1
Receivables, prepaid expenses, and other current assets	14.5
Property and equipment	28.4
Goodwill⁽¹⁾	67.4
Other intangible assets
Gaming license	166.4
Trademark	24.4
Customer relationships	3.3
Operating lease right-of-use assets	516.1
Finance lease right-of-use assets	4.1
Total assets	$	855.7

Accounts payable, accrued expenses and other current liabilities	$	15.2
Operating lease liabilities	516.1
Finance lease liabilities	4.1
Total liabilities	535.4
Net assets acquired	$	320.3


(1)	The goodwill has been assigned to our Northeast segment. The entire $67.4 million goodwill amount is deductible for tax purposes.

The Company used the income, market, or cost approach (or a combination thereof) for the valuation, as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability. Property and equipment acquired consists of non-REIT assets (e.g., equipment for use in gaming operations, furniture and other equipment). We determined that the land and buildings subject to the Greektown Lease, which was entered into at the time of the acquisition, represented operating lease right-of-use assets with a corresponding operating lease liability calculated based on the present value of the future lease payments at the acquisition date in accordance with GAAP. Management determined the fair value of its office equipment, computer equipment and slot machine gaming devices based on the market approach and other personal property based on the cost approach, supported where available by observable market data, which includes consideration of obsolescence.

Acquired identifiable intangible assets consist of a gaming license and a trademark, which are both indefinite-lived intangible assets, and customer relationships, which is an amortizing intangible asset with an assigned useful life of 2 years. Management valued (i) the gaming license using the Greenfield Method under the income approach; (ii) the trademark using the relief-from-royalty method under the income approach; and (iii) customer relationships (rated player databases) using the with-and-without method of the income approach. All valuation methods are forms of the income approach supported by observable market data for peer casino operator companies.

The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Greektown had occurred as of January 1, 2018. The pro forma financial information does not represent the anticipated future

results of the combined company. The pro forma amounts include the historical operating results of Penn National and Greektown prior to the acquisition, with adjustments directly attributable to the acquisition, inclusive of adjustments for acquisition costs. The below pro forma results do not include any adjustments related to synergies.



	For the three months ended March 31,
(in millions)	2020			2019
Revenues	$	1,116.1		$	1,366.6
Net income (loss) attributable to Penn National	$	(608.6	)	$	49.2

Margaritaville Resort Casino

On January 1, 2019, the Company acquired the operations of Margaritaville for a net purchase price of $122.9 million, after working capital and other adjustments (of which, $3.0 million was paid during the three months ended March 31, 2020), pursuant to (i) an agreement and plan of merger (the “Margaritaville Merger Agreement”) among the Company, VICI, Bossier Casino Venture (HoldCo), Inc. (“Holdco”), and Silver Slipper Gaming, LLC, and (ii) a membership interest purchase agreement (the “MIPA”) among VICI and the Company.

Pursuant to the Margaritaville Merger Agreement, a subsidiary of VICI merged with and into Holdco with Holdco surviving the merger as a wholly-owned subsidiary of VICI (the “Merger”) and owner of the real estate assets relating to Margaritaville. Pursuant to the MIPA, immediately following the consummation of the Merger, HoldCo sold its interests in its sole direct subsidiary and owner of the Margaritaville operating assets, to the Company. In connection with the acquisition, the real estate assets used in the operations of Margaritaville were acquired by VICI for $261.1 million and the Company entered into the Margaritaville Lease (as defined in Note 10, “Leases”). The acquisition of the operations was financed through incremental borrowings under the Company’s Revolving Credit Facility.

Tropicana Las Vegas

During the first quarter of 2020, we determined that the real estate assets used in the operations of our Tropicana property, which is included within our West segment, met the criteria for classification as assets held for sale pursuant to Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant, and Equipment,” due to obtaining approval from the Board of Directors as well as the entrance into the Term Sheet on March 27, 2020 with GLPI for the sale of the real estate assets associated with Tropicana. We will continue to operate the Tropicana subsequent to the sale to GLPI, which closed on April 16, 2020 (see Note 18, “Subsequent Events”). The carrying amounts of the major classes of assets held for sale were as follows:



(in millions)	March 31, 2020
Land and improvements, gross	$	240.2
Building and improvements, gross	125.7
Construction in progress	3.1
Less: Accumulated depreciation	(32.7		)
Total assets classified as held for sale^,, current	$	336.3