Penn National Gaming and Pinnacle Entertainment have entered into a definitive agreement under which Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8 billion.

Under the terms of the agreement, Pinnacle shareholders will receive $20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share, which implies a total purchase price of $32.47 per Pinnacle share based on Penn National’s closing price on Dec. 15, 2017. The transaction reflects a 36 percent premium for Pinnacle shareholders based on Pinnacle’s closing price of $21.86 and Penn National’s closing price of $22.91 on Oct. 4, 2017.

The transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2018, according to a press release.

Pinnacle owns and operates 16 gaming and entertainment facilities in 11 jurisdictions across the U.S. Following the acquisition of Pinnacle and the planned divestiture of four of its properties to Boyd Gaming Corp., Penn National will have significantly greater operational and geographic diversity and operate a combined 41 properties in 20 jurisdictions throughout North America. The transaction is expected to generate $100 million in annual run-rate cost synergies following integration and is anticipated to be immediately accretive to free cash flow in the first year.

“By combining our highly complementary portfolios and similar operating philosophies, we will be able to leverage the strengths of both our companies and create an unparalleled experience for our regional gaming customers, while generating significant value for our shareholders and business partners,” said Timothy J. Wilmott, CEO of Penn National. “The combined company will benefit from enhanced scale, additional growth opportunities and best-in-class operations, creating a more efficient integrated gaming company.

“Tim and the Penn National team lead a high-quality organization that, like Pinnacle, has a long track record of operational excellence and accretive growth,” said Anthony Sanfilippo, chairman and CEO of Pinnacle Entertainment. “We believe the combination will produce an even stronger gaming entertainment platform that builds on the individual accomplishments of both companies and benefits our collective team members, shareholders and guests.”

In related news, Boyd Gaming Corp. has entered into a definitive agreement with Penn National to acquire the operations of Ameristar St. Charles, Mo.; Ameristar Kansas City, Mo; Belterra Casino Resort in Florence, Ind.; and Belterra Park in Cincinnati, Ohio.  The acquisition of these assets is in connection with Penn National’s proposed acquisition of Pinnacle Entertainment.

Under terms of the agreement, Boyd Gaming will pay total cash consideration of $575 million to acquire the four assets, representing a multiple of 6.25 times projected EBITDA before synergies. The company expects the transaction to be free cash flow positive and immediately accretive to earnings. Boyd Gaming expects the transaction to close in the second half of 2018, subject to the satisfaction of customary closing conditions and the receipt of all required regulatory approvals. The transaction is also contingent upon the successful completion of Penn National’s proposed acquisition of Pinnacle.