On Wednesday, the winner of the first Pennsylvania mini casino license was awarded to Penn National Gaming at a price tag just over $50 million. The license is the first of ten that will be auctioned over the next few months.
In making the winning bid Penn National outbid three companies, which were not named. The $50 million bid accounts for roughly half the state needs to fund part of the state budget.
What to expect from the new casino
The new Penn National casino will go in south central Pennsylvania. Although a specific location is not known at this time, the casino is marked to be built within a 30 mile radius that includes York, near the Maryland border. The dead center of the potential location is located in Yoe. Many Pennsylvania towns and municipalities choose to opt-out in the weeks leading up to the auction.
As part of the license requirements, a mini casino can have up to 750 slot machines and 30 table games — with an opportunity to increase to 40 at a later date. The $50 million price tag enables the mini-casino to offer slots; however, Penn National is also expected to pay an additional $2.5 million for the ability to offer table games. Penn National will need to meet a variety of additional license requirements to go forward with the mini casino, including paying $50.1 million to the state by January 12th.
Penn National suing Pennsylvania over mini casinos
In a interesting part of the story, Penn National is currently suing the state of Pennsylvania over the expansion of mini-casinos in the state, which they say will hurt the Penn National-owned Hollywood Casino. By making the bid, the company is hedging its bets should its lawsuit fail. If the lawsuit wins, Penn National will withdraw their bid.
As part of the October gambling expansion, a mini-casino may not go up within 25 miles of an existing casino or within 15 miles of another mini-casino. Due to the fact that Hollywood Casino sits in relative isolation compared to most PA casinos — most of which are in groups — they could be uniquely impacted by the new mini casinos.
Penn National Vice President Eric Schippers said the company is attempting to protect Hollywood Casino. “Frankly, it was an investment we felt like we had to make to protect a major market area for our casino. That cannibalization would have been, in our view, very significant, which is why we filed our federal lawsuit against the law.”
Penn National Gaming currently operates a casino in Harrisburg Pennsylvania. The company also has 26 facilities in 18 states. Penn National Gaming’s stock was mostly unchanged on the news.
Whats next?
Mini casino auctions will take place every two weeks up until May 16th, when out of state operators could join the mix. The next auction will be held on January 24th at 10 AM ET.
With a starting bid of $7.5 million, the $50 million bid vastly exceeded expectations. Ten years ago, Pennsylvania casinos paid around $50 million to operate up to 5,000 slot machines. The high price tag could impact the bids for future mini casinos. In two weeks time, we shall see.