Penn to sell Pa. property for $175M

BANGOR – Penn National Gaming announced Friday that it has entered an agreement regarding the sale of The Downs Racing and its subsidiaries to the Mohegan Tribal Gaming Authority.

According to a press release issued from Penn National’s corporate headquarters in Wyomissing, Pa., Penn anticipates net proceeds of approximately $175 million from the sale after taxes, post-closing adjustments, fees and other expenses. Spokesman Eric Schippers said Friday that the proceeds will be used to reduce the corporation’s debt load.

The sale, announced one day after Penn received a harness racing license from the Maine Harness Racing Commission, will have no impact on the company’s plans for Bangor Raceway, Schippers said.

“We have properties and operations in eight states and Canada, and we have already discussed a budget for Bangor that will not be affected by the sale of The Downs,” he said.

The Mohegan Tribal Gaming Authority operates the Mohegan Sun Casino in Uncasville, Conn. The casino is owned by the Mohegan Indian Tribe.

According to Schippers, Penn’s plans for developing a racetrack casino at Bangor’s city-owned harness racing track call for an investment of up to $75 million – $50 million for the construction of a gaming facility, attached multi-level parking garage and related site improvements, and another $25 million for slot machines and other equipment.

He said divesting itself of Pocono will allow Penn to reduce its debt load and make it eligible for slot machines under Pennsylvania’s new slots law, which limits any one state licensee to full ownership of one licensed slots operation and no more than 33 percent in a second licensed operation.

The sale paves the way for Penn’s plans to develop a slot machine facility at Penn National Race Course in Grantville, Penn.

Under the terms of the agreement, the tribal gaming authority will acquire The Downs Racing and its subsidiaries, which include Pocono Downs, a standardbred horse racing facility, and five Pennsylvania off-track wagering operations located in Carbondale, East Stroudsburg, Erie, Hazleton and Lehigh Valley.

The total purchase price also reflects the sales of a 400-acre parcel of prime real estate and a network of off-track betting facilities positioned to capitalize on the improvements in racing the state expects to experience in future years.

Opened in 1964 and purchased by Penn in 1996, Pocono Downs is an established harness racing facility located in Wilkes-Barre, Pa., about 15 minutes from the popular Pocono Mountain resort area. The Lehigh Valley off-track wagering facility is a 28,000-square-foot facility, the largest facility of its kind in the state of Pennsylvania. In the 12-month period ending June 30, the assets of The Downs Racing and its subsidiaries generated approximately half of Penn’s total Pennsylvania revenue and operating income.

“While we would have preferred to have developed Pocono Downs ourselves, given the ownership restrictions on a second licensed slot operation in Pennsylvania, we concluded we had no alternative but to sell this property,” Chief Executive Officer Peter Carlino said about the pending sale.

“We believe the Pocono Downs’ employees, the horsemen, and the Wilkes-Barre region will be well served through [the Mohegan gaming authority], given its proven track record as a successful and experienced gaming resort operator,” he said. “With the sale announced today, we will proceed with our plans to develop and open a slot machine facility at Penn National Race Course in early 2006.”

The transaction, which calls for a $280 million purchase price before adjustments, taxes and other costs, is expected to close before the end of this year and is subject to customary closing conditions and regulatory approvals, including the approval of the Pennsylvania Harness Commission.