Merrill Keeps Buy on Penn National

Analyst David Anders says gaming operator's latest acquisition will make it one of the largest in the U.S.

Merill Lynch maintains its buy rating on Penn National Gaming (PENN ).

Penn National agreed to acquire Argosy Gaming (AGY ) in a cash deal valued at $2.2 billion. Analyst David Anders believes there are three strategic drivers to the transaction: diversification, property expansion opportunities, potentially lower borrowing costs.

He says the announcement permits Penn National to enter into three new jurisdictions: Lawrenceburg, Ind., Kansas City, Mo., and Sioux City, Iowa. Anders notes the combination would create one of the largest gaming operators in the U.S., with annual revenues of over $2 billion, over 700,000 square feet of gaming space, and 20,000 gaming devices.

He keeps the $47 target, which could be conservative.

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