11/16/2012 10:31AM

Penn National Gaming plans to split into two companies


Penn National Gaming Inc., the casino and racetrack operator, intends to split into two publicly traded companies to take advantage of a structure giving tax benefits to real-estate holding companies, the company announced on Thursday.

The split would put nearly all of the company’s real-estate holdings in a company known as a real-estate investment trust, which qualifies for tax breaks. The company’s gambling businesses would be run by an operating company that would continue to be known as Penn National Gaming Inc., the company said.

Though Penn National said that it would be the first gambling company to pursue such a structure, Santa Anita Park was once owned and operated under a similar arrangement when it was bought by Meditrust in 1997. After several tax-benefits were eliminated for REITs, as the companies are known, Meditrust sold the track to Magna International, the publicly traded company founded and once controlled by Frank Stronach. Stronach retains ownership of Santa Anita through a private company.

Under the dual structure, the operating company rents the properties from the REIT. In a release, Penn National said that rent paid by the operating company to the REIT would total approximately $450 million a year.

Separately, Penn National announced on Thursday that it had submitted a bid for a license for a casino in the Philadelphia area. Penn National already operates a casino in Pennsylvania at its Penn National property in Grantville.

Five companies, including Greenwood Racing, the owner of Parx casino and racetrack in Philadelphia, submitted a bid for the license, which is expected to be one of the most valuable in the state. Pennsylvania law prohibits a company from owning more than one-third of a stake in an additional casino, and Penn said that it hoped to partner with the city of Philadelphia or “one of its designated entities” to skirt the restriction.