Gaming and Leisure Properties, Inc. (NASDAQ:GLPI) and Pinnacle Entertainment, Inc. (NYSE:PNK) today jointly announced that they have entered into a definitive agreement under which GLPI will acquire substantially all of Pinnacle's real estate assets in an all-stock transaction.

Under the terms of the agreement, which was unanimously approved by both companies' Boards of Directors, Pinnacle's operating business and the real property of Belterra Park Gaming & Entertainment will be spun off into a separately traded public company ("OpCo") and the real estate assets held by the remaining company ("PropCo") will be acquired by GLPI. Pinnacle shareholders will receive a fixed exchange ratio of
0.85 GLPI common shares per Pinnacle share for PropCo. Pinnacle shareholders will also receive one share of OpCo common stock for each share of Pinnacle they own.

"Pinnacle's real estate portfolio brings great properties to GLPI and adds one of the leading gaming operators as a new tenant," said Peter Carlino, chairman and CEO of GLPI. "Pinnacle's proven track record of continued improving operating performance will make GLPI even stronger as we pursue long-term growth. The combination of these extremely attractive gaming real estate portfolios will create the third largest publicly traded triple-net REIT, with the scale, diversity and financial strength to deliver increased value to both companies'
shareholders. Our combined shareholders will benefit from the stable, significant cash flows that we will generate from our long-term lease agreements - along with our commitment to maintaining a strong balance sheet, including an investment grade credit rating that will enable us to pursue future opportunities. We are excited to develop a mutually beneficial, long-term relationship with a quality organization and we look forward to working with them on future additional transaction opportunities."

"This is a compelling transaction that unlocks the value of Pinnacle's real estate assets and delivers substantial value to our shareholders,"
said Anthony Sanfilippo, chief executive officer of Pinnacle Entertainment. "In addition, Pinnacle shareholders will have the opportunity to benefit from owning a larger, more diversified REIT. As a premier operator of casino, resort and entertainment properties, Pinnacle will continue to improve its operating efficiency, expand property level margins and pursue growth opportunities that leverage the Company's proven management and development skills. Our Company will be well capitalized and positioned for future growth with pro forma initial year leverage of approximately 3.5x, and have the financial flexibility to capitalize on future value-enhancing opportunities."

The agreed-upon exchange ratio gives PropCo an implied enterprise value of $4.75 billion, implying 12.6x initial year PropCo adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), or 13.2x including transaction-related fees and expenses. Pro forma for the transaction, existing Pinnacle shareholders will own 100% of OpCo and approximately 56 million shares in GLPI, representing an approximate 27% equity interest in the larger, post-transaction GLPI.

Pinnacle's OpCo will continue to own and operate other assets, including Belterra Park Gaming & Entertainment, the Heartland Poker Tour, Pinnacle's interest in Retama Park, gaming licenses, gaming equipment as well as approximately 450 acres of developable land, principally in Lake Charles and Baton Rouge, adjacent to real estate GLPI would acquire.

After the close of the transaction, which the companies expect will be completed in the first quarter of 2016, Pinnacle will operate the leased gaming facilities under a triple-net 10-year Master Lease agreement with GLPI that will have five subsequent, five-year extension periods at Pinnacle's option. Pinnacle will initially pay GLPI $377 million in rent in the first year after close, which will result in a lease coverage ratio of 1.9x adjusted property earnings before interest, taxes, depreciation, amortization and rent (adjusted property EBITDAR)/lease expense. GLPI anticipates the transaction will deliver low double-digit percentage accretion to its pro forma adjusted funds from operations (AFFO) per share in the first year after close. Under the triple-net lease structure, GLPI will benefit from the continued revenue growth of Pinnacle's operating assets. The combined REIT expects to continue to distribute at least 90% of its annual taxable income as dividends, and the first full year dividend per share is expected to increase by approximately a low double-digit percentage.

The addition of Pinnacle's 14 properties in 7 states to GLPI's existing portfolio of 21 properties in 12 states will give the combined company
35 casino and hotel assets across 14 states. The combined REIT will lease 18 of its facilities to Penn National Gaming, 14 to Pinnacle and one to Casino Queen in East St. Louis, Illinois. GLPI Holdings, Inc., a subsidiary of GLPI, will continue to own and operate two gaming facilities located in Baton Rouge, Louisiana and Perryville, Maryland.

The transaction is subject to customary closing conditions, including regulatory approvals and the approval of GLPI and Pinnacle's shareholders. The Carlino Family Trust and Fortress Investment Group have signed agreements to vote in support of the transaction.

GLPI has secured committed financing for the transaction from BofA Merrill Lynch and J.P. Morgan, subject to customary conditions.
Pinnacle has secured committed financing from J.P. Morgan, Goldman, Sachs & Co., BofA Merrill Lynch, U.S. Bank, Fifth Third Bank, Wells Fargo Bank, Credit Agricole and Deutsche Bank.

Morgan Stanley, BofA Merrill Lynch and J.P. Morgan Securities LLC are acting as financial advisors and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to GLPI. Goldman, Sachs & Co. is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP and Gibson, Dunn & Crutcher LLP are acting as legal advisors to Pinnacle.