Susquehanna Downgrades Pinnacle On Lack Of Upside, But Calls Gaming & Leisure Bid A 'Win-Win'

In a report published Thursday, Susquehanna analyst Rachael Rothman downgraded the rating on

from Positive to Neutral, with a price target of $44. The analyst believes that the revised offer from

is positive for both companies, although there is limited upside to Pinnacle's stock, given the significant capital raise required to complete the deal. "GLPI announced on Tuesday that it has increased its offer to acquire PNK's real estate assets, bringing the total implied value for PNK's shares to $47.50. We believe the revised offer makes sense for both parties," analyst Rothman revealed. According to this revised offer, Pinnacle's shareholders would receive about 30 percent more value, as compared to the original bid, while uncertainties would be lower than if Pinnacle undertake a standalone spinoff of its REIT business. "For GLPI, the plan helps consolidate its largest potential competitor, thereby reducing competition and increasing its scale," the Susquehanna report stated, while adding that while the new offer will bring little accretion for Gaming and Leisure Properties, it might also make the offer less attractive to Pinnacle's shareholders, given that the increased value will come in stock alone. "In our view, the easy money has been made, and we expect event-driven investors move on to other names. Once PNK accepts or rejects the revised offer, it's very likely that there could be considerable pressure on the stock as the investor base turns over," analyst Rothman added.