Pinnacle Entertainment, Inc (NYSE:PNK) is a stock that has made the headlines in the last couple of days. The stock gained 23% in the last three days as a real estate investment trust Gaming and Leisure Properties Inc (NASDAQ:GLPI) offered to buy all real estate assets held by Pinnacle for $4.1 billion. The deal has a high chance to go through as recently Daniel Lewis‘ Orange Capital, which an investor of the company has issued a statement in support of a transaction between Pinnacle Entertainment, Inc (NYSE:PNK) and Gaming and Leisure Properties Inc (NASDAQ:GLPI) and most likely other shareholders of Pinnacle are also very excited about it. Orange Capital owns around 2.94 million shares of Pinnacle Entertainment, up from 2.58 million shares held at the end of 2014, the activist stake amassing nearly 5.0% of the company’s common stock.
However, Orange Capital is not satisfied with the value of the bid, considering that $4.1 billion significantly undervalues the assets. Pinnacle PropCo, a company that amasses Pinnacle Entertainment, Inc (NYSE:PNK)’s real estate assets is priced at an Enterprise Value/EBITDA multiple of 11.3x, the investor stated. On the other hand, Triple-Net REIT peers trade in a range between 14x and 18x forward EBITDA and every multiple “turn” of EBITDA equalas approximately $5.70 in value for Pinnacle Stockholders, the statement added.
Nevertheless, Orange Capital considers that GLPI’s offer has many merits in comparison with an independent Pinnacle PropCo, that would be a publicly traded REIT. Following a merger, the new company would have an increased scale, corporate cost synergies, tenant diversification, and certainty of timing and ability to close. Therefore, the investor considers that Pinnacle Entertainment, Inc (NYSE:PNK)’s board should continue to engage in negotiations with Gaming and Leisure Properties. In an earlier statement, Pinnacle said that GLPI approached them in January and expressed an interest in acquiring Pinnacle’s real estate assets, but the talks have failed because the board considered the offer not to be in the best interest of the shareholders in comparison with an existing plan of creating an independent, publicly-traded REIT.
Orange Capital has been pushing for a separation of Pinnacle Entertainment, Inc (NYSE:PNK)’s real estate assets since April, 2014 and in November the company decided to pursue the spin-off.
Another shareholder of Pinnacle that is looking forward to a potential deal with Gaming and Leisure Properties Inc (NASDAQ:GLPI) is Parag Vora’s HG Vora Capital Management. Vora owns 5.50 million shares of the company, valued at $122.38 million as of the end of 2014. Moreover, the fund is the largest shareholder among the funds that we track and its stake in Pinnacle represents the largest holding in the equity portfolio.
Orange Capital owns a concentrated equity portfolio that contains only 11 long positions and two positions in ‘Put’ options underlying shares of two S&P 500 Exchange-Traded Funds. The fund’s largest holding in terms of value is represented by H & R Block Inc (NYSE:HRB), in which Orange owns nearly 3.0 million shares, valued at $100.88 million. The fund initiated a stake during the first quarter of 2014 and in the next three months, Mr. Lewis surged his exposure to the company by 130%. H & R Block Inc (NYSE:HRB) is a tax preparation company that offers services to the public in the US, Canada, and Australia, whose stock gained over 15% during 2014. H & R Block Inc (NYSE:HRB) also represents one of the top picks in the equity portfolios of Alex Von Furstenberg and Mal Serure’s Arrow Capital Management and Charles Jobson’s Delta Partners, which own 557,000 shares and 404,500 shares respectively.
Next in line in Orange Capital’s equity portfolio is Bellatrix Exploration Ltd (NYSE:BXE), in which the fund held 25.58 million shares as of the end of 2014, the value of the stake amounting to $100.38 million. Mr. Lewis has been bullish on the company since the third quarter of 2014, when Orange initiated a stake in the company. During the last three months of 2014, the position has been raised by 55% and the investor went activist on the company. In December Orange Capital and Bellatrix Exploration Ltd (NYSE:BXE) signed an agreement, under the terms of which the investor nominated Danille Lewis and Steven J. Pully for election to the company’s board at the next annual meeting of shareholders. In the last six months, Bellatrix stock slumped by 60%, being severely affected by declining oil & gas prices, the company being engage in the exploration & production industry. Another major investor that is bullish on Bellatrix Exploration Ltd (NYSE:BXE) is Seth Klarman‘s Baupost Group, which initiated a stake in the company during the fourth quarter and holds around 18.10 million shares as of the end of 2014. Orange Capital and Baupost are the largest shareholders of Bellatrix Exploration Ltd (NYSE:BXE) among institutional investors.
While Mr. Lewis raised his stake in Bellatrix, in NorthStar Asset Management Group Inc (NYSE:NSAM) Orange’s position was cut by 20% during the October-December period. The fund disclosed a $97.37 million stake in the company that contains 4.31 million shares. Mr. Lewis added the company to his equity portfolio during the third quarter and trimmed the stake as the stock gained 20% during the last three months of 2014. NorthStar Asset Management Group Inc (NYSE:NSAM) is engaged in managing real estate investment platform and its stock sports a P/E of 245.00, which is significantly above the industry average of 18.00. Nevertheless, among the funds that we track 70 investors disclosed holding shares of NorthStar Asset Management Group Inc (NYSE:NSAM), including six funds managed by billionaire investors, among which the largest holdings are held by Ken Griffin‘s Citadel Investment Group and David Einhorn’s Greenlight Capital. Citadel and Greenlight disclosed 5.35 million shares and 4.54 million shares respectively in their latest 13F filings.
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