Penn National Gaming‘s roots are long and deep in Pennsylvania. The home-grown company is decidedly and stubbornly different from other large gambling industry players.
The other biggies – Las Vegas Sands, MGM Resorts International, Wynn Resort, and Caesars Entertainment – are headquartered in Las Vegas, rooted in Nevada.
And while those gaming companies have marquee names and glittery headquarters, the company with the surging bull run on Wall Street is Penn National, headquartered in a bland office park in off-the-beaten-path Wyomissing, PA.
With business concentrated in smaller regional markets, the company operates more than 40 facilities in 19 jurisdictions. The properties feature approximately 50,000 gaming machines, 1,300 table games, 8,800 hotel rooms, and more than 20,000 employees.
How Penn evolved
How Penn’s gambling business began with a single PA thoroughbred track built in the middle of nowhere, just about 20 minutes north of Harrisburg, in Grantville, to become the largest pari-mutuel racing and regional gaming company in the country is a fascinating untold story.
PlayPennsylvania examines Penn’s history in three parts, corresponding to the following timelines: the early years from 1969 to 2005, the middle years of growth from 2006 to 2018, and a company refocus toward online gaming from 2019 to the present.
Humble beginnings aside, Penn’s stock price today is far outpacing the better-known Vegas-based gaming companies trading on Wall Street.
Penn National’s amazing bull run in the market
Penn’s stock is up, way up.
On March 3, $PENN opened at $126.28. According to MarketWatch, it’s up 16.2% in a month, 76.5% in 3 months, 46.8% year-to-date, and 386.6% in one year. The 52-week range is a dizzying $3.75-$129.
The low, of course, came in mid-March 2020 in the face of COVID-19 restrictions, with closures, furloughs, forced real estate sales, and two emergency stock offerings for a company hemorrhaging cash in early spring as the virus took hold.
First, back to the beginning: Why Wyomissing?
The tiny borough of Wyomissing in Berks County northwest of Philadelphia adjoins the larger impoverished city of Reading and is best known as the birthplace of pop singer Taylor Swift. Wyomissing is an American Indian name meaning “flat land” and has neither gambling nor horse racing roots.
The town is a 70-mile drive to Penn’s Hollywood Casino in Grantville, the location of the horse track where Penn National was born, making Wyomissing an even more improbable headquarters for a major US gaming company.
But Wyomissing is the legacy location for the late Peter D. Carlino‘s business empire and his family, particularly son Peter M. Carlino.
An unlikely gambling mogul
The youngest of nine in an Italian-American family from a modest rowhome neighborhood in working-class Philadelphia, the elder Carlino attended local parochial schools, including an all-male high school. Then it was on to St. Joseph’s University, a small Jesuit institution set on the edge of Philly in an assemblage of grey stone Gothic buildings, also all-male back then. Carlino also took classes at the University of Pennsylvania.
As a teen, he sang on a radio program for children, but the rest of his life was filled with work and family – eight children, 20 grandchildren, 22 great-grandchildren. He was married to his wife for more than 45 years until her death.
Carlino began working in a florist shop in his childhood neighborhood run by two of his brothers.
But he moved on to become a designer for a posh society florist – think Grace Kelly in the movie High Society. Carlino then ran his own flower shop on the Main Line, part of the tony suburbs Northwest of Philly.
Carlino a workaholic
A workaholic, he also moonlighted selling fire and homeowners insurance door to door after finishing his day job, forming the Peter D. Carlino Agency as an agent for a fire insurance company linked back to Ben Franklin, Philly’s original entrepreneur.
He went on to form the Germantown Title Insurance Company in 1960 because he realized title insurance played a role in nearly all real estate transactions.
The company eventually moved from Philly to Montgomery County, where he also made his home.
In 1969, he bought the Penn Title Insurance Company, then a 40-year-old business located in Wyomissing, the start of a string of businesses in that tiny town that eventually included a bank, a mortgage company, real estate ventures – and even seafood and gourmet pretzel companies.
And then he was off to the races.
Peter D. Carlino Bio Snapshot
- Born May 12, 1921 in Philadelphia.
- Married Elizabeth Powers in 1945, had eight children. Elizabeth died in 1991. A family trust remains involved with Penn National.
- Began working in brothers’ Philly floral shop; eventually owned a shop in the suburbs.
- Became agent for a fire insurance company. Founded a title insurance company in Philly. Bought a title insurance company in 1969 in Wyomissing, Berks County, the future hub for most of his businesses.
- Involved in creating what became Philadelphia Park, now Parx race track in Bensalem, just outside Philly. Also helped create Mountainview Thoroughbred Racing Association in Grantville.
- Chairman of Philadelphia Redevelopment Authority in 1970s. Board member of several medical institutions and a university; aided Catholic charities.
- Died November 29, 2013 at the age of 92.
Off to the races for Penn
In the early 1970s, Carlino became the first president of the Keystone Racing Association. While a minority partner, he financed and built Keystone Race Track in Bensalem, which opened in 1974. His participation did not last long. A decade later, the track became Philadelphia Park, then was renamed Parx Racing and Casino in 2010.
In 1971 Carlino formed Mountainview Thoroughbred Racing Association, which ran a thoroughbred racing meet at Penn National from its opening in 1972. A decade later, he acquired the racetrack property itself.
A spokesman for Penn National explained that the elder Carlino “was always a big fan of horse racing and got together with a group of friends to invest in this racing license. He eventually became the sole owner.”
In 1994 the track became the basis of Penn National Gaming when his family company went public. A son, Peter M. Carlino, oversaw the IPO, and he became CEO, a position he held until 2013, though he remained Penn’s chairman for years.
Smart buys powered major growth under Carlino’s son
Penn’s revenues grew from $40 million in 1994 to more than $1 billion by 2003. By 2001, Penn National Gaming had made Fortune magazine’s 100 Fastest Growing Companies list at 58th. It jumped to 12th the following year.
Buys under Peter M. Carlino that powered the growth included:
- Pocono Downs in 1996. This was a buy of a small harness track in Northeast PA after the unexpected death of its sole-owner. But it also brought with it a number of OTB outlets. Penn sold it in 2005. The location now runs as a racino, Mohegan Sun Pocono.
- Charles Town Races in 1997. The facility opened in 1933 and did well for decades before entering a long, slow fade period following WW II. That reversed when West Virginia voters approved placing video lottery machines at the state’s tracks in 1996, prompting the purchase by Penn. Carlino spelled out the company’s strategy of buying tracks with plans to expand into new gambling opportunities in an annual report.
- A half interest in Freehold Raceway and the operations of Garden State Park in 1999.
A shift from tracks to casinos
- The company acquired its first standalone casino properties in 2000, Casino Magic Bay St. Louis and Boomtown Biloxi, from Pinnacle Entertainment. The buys helped to diversify Penn’s geographical spread.
- Next came Carnival Resorts & Casinos, including ownership of Casino Rouge in Baton Rouge, Louisiana, and the management contract for Casino Rama in Ontario, Canada in 2001.
Peter M. Carlino told the Las Vegas Sun the Carnival buy “builds the critical mass of our gaming operations when combined with our soon-to-be-completed acquisition of the Casino Magic hotel and casino and the Boomtown Biloxi casino,” both in Mississippi. At the time, $PENN stock traded for about $14.50 a share.
Then came the two major buys that completely shifted the company away from racing and doubled Penn’s revenues.
- Hollywood Casino Corporation in 2003 for $328 million, plus $360 million in assumed debt. It gave Penn four additional casinos, including Sands Atlantic City – since closed. The combined company became the seventh-largest public gaming company in the US, with annual revenues above $1 billion.
Carlino explained the move in a company statement:
“The acquisition of these well-established properties represents a significant growth and expansion opportunity for Penn National and is attractive both strategically and financially. The acquisition, which almost doubles our revenue base, is expected to be accretive to our operating results upon closing, builds the critical mass of our gaming operations, and further diversifies the geographic reach of our operations without any overlap with our existing properties.”
Argosy transformed Penn
- In 2004, Penn National acquired Argosy Gaming Company for $1.4 billion, plus $791 million in assumed debt. It added five casinos and one horse track to Penn’s list of properties.
Argosy was best-known locally for riverboat casinos and entertainment and hotel facilities in Illinois, Missouri, Louisiana, Iowa, and Indiana. That purchase again doubled Penn National’s size and made it then the third-largest publicly held gaming company in the country, behind only MGM Mirage and Harrah’s Entertainment.
Carlino again explained the move in a statement:
“The acquisition, which essentially doubles our revenue and EBITDA, is expected to be immediately accretive to our operating results upon closing, builds critical mass for our gaming operations, and provides in-market opportunities in several regions while further diversifying our geographic reach to three new markets. The combined entity will benefit from a broader, deeper base of properties and management and will generate significant free cash flow available for debt reduction and further investment in our portfolio of properties.”
Then came business disappointments beginning in 2006, the subject of Penn National History: Part 2.