GLPI Significantly Increases Offer to Acquire Pinnacle's Real Estate Assets

Gaming and Leisure Properties, Inc.

today sent a letter to the Board of Directors of Pinnacle Entertainment, Inc.

conveying a significantly increased offer to acquire the real estate assets of Pinnacle (see letter below). As previously announced, GLPI has proposed that Pinnacle's operating business would be spun off into a separately traded public company ("OpCo") and its remaining real estate assets ("PropCo") would be merged into GLPI. Under GLPI's revised proposal, Pinnacle shareholders would receive a fixed exchange ratio of 0.85 GLPI common shares per Pinnacle share for PropCo, which is a 54% increase over the previously announced exchange ratio of 0.5517 on March 9 and values PropCo at over $31.50 per Pinnacle share based on GLPI's closing share price yesterday. This implies a PropCo enterprise value of $5.0 billion, or approximately 13.3x the initial year's PropCo adjusted EBITDA, while maintaining a lease coverage ratio at OpCo of 1.9x property EBITDAR/lease expense. Pinnacle shareholders would also continue to receive one share of OpCo common stock for each share of Pinnacle they own, which has an assumed value of approximately $16.00 per Pinnacle share. The total implied value would be approximately $47.50 per share, which is a 73% premium to Pinnacle's unaffected stock price on March 9, 2015, and a 27% premium to the current stock price. GLPI has committed financing in place and is ready to finalize this transaction immediately, and we would expect to close our transaction within approximately six months of signing. Nevertheless, Pinnacle continues to make new demands, delaying the signing of a definitive agreement and denying its shareholders a value-creating transaction that is clearly superior to Pinnacle's previously announced standalone separation plan. Pro forma for the transaction, Pinnacle shareholders would own 100% of OpCo and an approximately 28% equity interest in an enlarged GLPI, which would be the third-largest triple-net REIT by enterprise value, with the scale, diversity and financial strength to deliver increased value to both companies' shareholders. Under the enhanced GLPI proposal, Pinnacle's OpCo would continue to own and operate certain other assets, including Belterra Park Gaming & Entertainment, the Heartland Poker Tour, Pinnacle's interest in Retama Park, gaming licenses, gaming equipment as well as approximately 450 acres of developable land adjacent to real estate GLPI would acquire. The text of the letter is set forth below: July 7, 2015 Board of Directors c/o Anthony M. Sanfilippo, Director and CEO Pinnacle Entertainment, Inc. 3980 Howard Hughes Parkway Las Vegas, NV 89169 Dear Anthony: We are disappointed by your rejection of our revised proposal to acquire Pinnacle's real estate assets – a proposal that was consistent with our prior mutual understandings on aggregate consideration. In a final effort to reach agreement on terms that will be attractive to both your and our shareholders, we are pleased to present a revised proposal in which Pinnacle's operating business would be spun off into a separately traded public company ("OpCo") and its remaining real estate assets ("PropCo") would be merged into GLPI for a fixed exchange ratio of 0.85 GLPI shares per Pinnacle share - an increase in the exchange ratio by 54% and in total consideration by approximately $1 billion from our March 9th offer. Our revised offer represents an enterprise value for the acquired real estate assets of $5.0 billion, equivalent to approximately 13.3x PropCo adjusted EBITDA (initial annual lease payment) and total value to Pinnacle stockholders of approximately $47.50 per share, comprised of over $31.50 per Pinnacle share for PropCo, and an estimated $16 per share for 100% ownership of a well-capitalized OpCo. This revised offer represents a 73% premium over the price of Pinnacle's stock the day prior to our March 9th offer. Full details of this revised proposal are set forth in Annex A, and we note the following: OpCo Structured to Retain Material Growth Opportunities. With a lease coverage ratio of 1.9x adjusted property EBITDAR / lease expense and pro forma leverage of 4.2x, OpCo will be well capitalized and positioned for growth. OpCo would also retain ownership of valuable assets including Belterra Park Gaming & Entertainment, Pinnacle's interest in Retama Park, the Heartland Poker Tour, gaming licenses, gaming equipment as well as approximately 450 acres of developable land adjacent to real estate GLPI would acquire. A Financially Strong Combined Company for the Benefit of Pinnacle's Stockholders. In addition to 100% of OpCo, Pinnacle stockholders and employee equity award holders would own 56.5 million shares in GLPI, representing an approximate 28% equity interest in the third-largest triple-net REIT by enterprise value, with the scale, diversity and financial strength to deliver increased value to the combined company's shareholders going forward. Your stockholders will, therefore, be material beneficiaries of the accretion to GLPI's AFFO per share created by our proposed transaction. Further, GLPI will have an enterprise value in excess of $12 billion and intends to retain its current investment grade rating, which our shareholders and debtholders have emphasized is a high priority to them. This will facilitate the combined company's long-term growth and benefit your stockholders as material owners of the combined company. Master Lease. You initially refused the "Penn National" master lease rent structure and asked us to accept an unconventional rent structure, then, weeks later, indicated that you no longer sought this arrangement and requested that we move to the "Penn National" structure – a structure that has been well-received by the market and permitted Penn National Gaming to execute its growth strategy. As we have indicated, we are willing to accommodate this request. Our current offer is on master lease terms substantially similar to our lease with Penn National Gaming and provides for an initial annual lease payment of $377 million, which yields a strong 1.9x lease coverage ratio. Timing and Certainty. Our proposal offers materially improved timing and certainty relative to your announced standalone plan. We believe your standalone plan would be unlikely to close until late 2016 at the earliest, and faces significant execution risk not present in our proposal, including, among other items, receipt of an IRS ruling, identification of a management team and risks concerning market receptivity to your REIT if it ultimately were to become publicly traded. In contrast, our transaction documents are in substantially final form and could be finalized and executed in a matter of days, and with your full cooperation and collaboration, we would expect to close our transaction within approximately six months of signing. Further, we expect regulatory approvals for our transaction will be readily obtainable and, to provide you with further assurance, have agreed to the $150 million breakup fee which you requested if regulatory approval is not obtained. We have attempted repeatedly over the last four months to reach agreement with you on a transaction and we stand ready to execute a transaction on the terms outlined above immediately. We have previously delivered to you our committed financing documentation, which we are prepared to execute, as well as all of the transaction agreements reflecting our negotiations, which we believe are in substantially final form. GLPI has stretched itself to its limit on value and presented a highly compelling transaction to your stockholders. Similar to your failure to meaningfully engage with us prior to the initial public announcement of our proposal in March, your continually shifting demands regarding transaction terms and value are not in your stockholders' best interest. Most recently, you have not only rejected a transaction representing a substantial premium to your stock price and executable with greater speed and certainty than your standalone plan, but elected not to even specifically identify many of your concerns, let alone propose alternatives that could address them. Therefore, we once again are left with no choice but to publicly disclose our proposal concurrently with its delivery to you and enable your stockholders to make their own judgments as to whether this proposal is superior to your standalone plan. We very much look forward to your response, and to promptly finalizing this compelling transaction. Very truly yours, ______________________________________________ Peter M. Carlino Chairman of the Board and Chief Executive Officer Gaming and Leisure Properties, Inc. Annex A Implied PropCo Enterprise Value / Purchase Multiple $MM Exchange Ratio 0.8500 GLPI Current Share Price $36.67 PropCo Value / Share $31.17 Pinnacle Basic Shares Outstanding 60.5 PropCo Equity Value to Basic Shareholders 1,886 Value of GLPI Shares Issued for Pinnacle Employee Equity Awards 186 Total Implied PropCo Equity Value $2,072 Implied PropCo Debt (1) 2,648 Estimated Debt Breakage Costs 181 Accrued Interest 49 Estimated OpCo Spin Taxes 11 Other Tax Items 21 Medicare Costs for Equity Awards 3 Cash for Performance Units Granted in 1H 2015 2 Pinnacle Transaction Fees Paid by GLPI 25 Lease Assignment Costs 2 Implied PropCo Enterprise Value $5,014 Lease Income 377 Adjusted Property EBITDAR Coverage 1.9x Implied PropCo Purchase Multiple 13.3x (1) Based on estimated Pinnacle 2015E debt of $3,675MM and pro forma OpCo debt of $1,027MM (implied 4.2x leverage) Illustrative Value to Pinnacle Shareholders at Close $MM PropCo Value Per Share 2016E GLPI Adjusted EBITDA $446 2016E PropCo Adjusted EBITDA 377 2016E Pro Forma Adjusted EBITDA $823 Trading Multiple (2) 14.7x Pro Forma GLPI Enterprise Value $12,086 Less: Debt (4,486) Plus: Cash 30 Pro Forma GLPI Equity Value $7,630 Pro Forma Shares Outstanding 205 Pro Forma GLPI Share Price $37.23 Exchange Ratio 0.8500 PropCo Value per Share to Pinnacle $31.65 OpCo Value per Share to Pinnacle $15.83 Total Value per Share to Pinnacle $47.48 (2) Represents unaffected pre-announcement standalone trading multiple of GLPI Comparison of 3/9/15 Offer to Current $MM 3/9/15 Offer Change Current GLPI Share Price $32.37 $36.67 Shares Issued to Pinnacle (MM) (3) 35.6 56.5 Equity Issued $1,151 +921 $2,072 PropCo Debt Assumed 2,616 2,648 Debt Breakage Costs 180 181 Assumed Liabilities Accrued Interest -- 49 Estimated OpCo Spin Taxes 116 11 Other Tax Items -- -20 21 Medicare Costs for Equity Awards -- 3 Cash for Performance Units Granted in 1H 2015 -- 2 Pinnacle Transaction Fees Paid by GLPI 50 25 Lease Assignment Costs -- 2 Total Assumed Liabilities 166 113 Transaction Value $4,113 +901 $5,014 Less: Belterra Park Staying at OpCo (75) +105 -- Less: Excess Land Staying at OpCo (4) (30) -- Adjusted Transaction Value $4,008 +1,006 $5,014 2016E OpCo Adjusted Property EBITDAR $686 $706 Initial Lease Payment $358 $377 Adjusted Property EBITDAR / Lease Expense 1.9x 1.9x Cash Received from OpCo for Debt Reduction $1,107 $1,027 Pro Forma 2015E OpCo Leverage 4.5x 4.2x (3) Includes both basic shareholders and employee equity award holders (4) ~450 acres of developable land given to OpCo Investor Presentation An updated investor presentation detailing GLPI's enhanced proposal is available on at the Company's investor relations website – www.glpropinc.com.