Orange Capital Boosts Stake in Pinnacle Entertainment, Inc (PNK) and Proposes a Real Estate Spin-Off

In a new filing with the Securities and Exchange Commission, Orange Capital, managed by Daniel Lewis, revealed raising its exposure to Pinnacle Entertainment, Inc (NYSE:PNK). The fund reported an activist stake, which contains some 2.64 million shares of the company, versus about 1.78 million shares held earlier. The position is equal to 4.5% of the company’s stock. At the same time, the fund filed a letter sent to the company’s board, in which it states that together with derivative agreements, the fund holds around 6.7% of Pinnacle’s common stock.

Pinnacle Entertainment, Inc (NYSE:PNK)

Moreover, the letter stated that Pinnacle Entertainment, Inc (NYSE:PNK) should conduct a spin-off of its real estate into an independent publicly listed real estate investment trust (PropCo Transaction), which would be distributed to shareholders through a tax-free spin-off transaction. According to the shareholder, the transaction could increase the share price of Pinnacle by 61%-92%, which would lead to a pro-forma valuation in the range of $35 to $42 per share.

Importantly, we believe a PropCo Transaction offers several corporate-level benefits, including:

1. Accelerated de-leveraging whereby consolidated net debt/EBITDA would improve to approximately 5.1x;

2. Reduction of Pinnacle’s cost of capital allowing the Company to more efficiently invest in existing or new gaming assets and strategic acquisitions; and

3. Additional growth opportunities associated with PropCo’s capability to acquire third-party gaming, entertainment, and lifestyle properties.

Orange Capital also considers that Pinnacle Entertainment, Inc (NYSE:PNK)’s acquisition of Ameristar Casinos, Inc. and the de-leveraging of the balance sheet, has brought significant value for shareholders, but the company is still valued at a discount in comparison to its closest peer, the combined Penn National Gaming, Inc (NASDAQ:PENN) and its real estate owner, Gaming and Leisure Properties Inc (NASDAQ:GLPI).

The full text of the letter can be accessed below:

Orange Capital’s Letter to Pinnacle Entertainment

In a press release issued on Monday, Pinnacle Entertainment, Inc (NYSE:PNK) commented the filing issued by Orange Capital saying, among other things, that since the announcement of the acquisition of Ameristar, the price of Pinnacle surged by around 65%. The company intends to take further actions and take into account all strategies necessary to obtain more value for its shareholders.

An example of this is the acquisition of Ameristar Casinos in 2013. As a result of this accretive transaction, we doubled the size of the Company, realized meaningful cost synergies, and significantly enhanced our scale and geographic diversification. We now have the largest owned portfolio of premium gaming entertainment properties in the U.S., which spans nine states and 13 regional markets.

Parag Vora’s Hg Vora Capital Management is also a significant shareholder of Pinnacle Entertainment, Inc (NYSE:PNK), which as at the end of 2013, held a total of 3.4 million shares of the company.

Disclosure: none

Recommended Reading:

Orange Capital Initiates Passive Stake In Nexstar Broadcasting Group Inc. (NXST)

Orange Capital Raises Activist Stake in PHH Corporation (PHH)

Cerberus Capital Reports Holding Over 8% of Ally Financial Inc (ALLY)

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!