Like his customers, there is nothing flashy about Carlino. He doesn't own designer suits. He drives himself to and from the airport. He will never have his own reality-TV show. "I don't need to see my name in lights," he said.
While he doesn't have the name recognition and the mega-watt ego of a Donald Trump or Steve Wynn, Carlino has quietly assembled a billion-dollar gambling empire after starting with a family racetrack in central Pennsylvania. Now, his company is about to assume a higher profile.
Penn National's $2.2 billion deal to acquire Argosy Gaming Co., of Alton, Ill., will double Penn National's size and make it the third-largest gambling company in the world, behind Las Vegas rivals Harrah's Entertainment Inc. and MGM Mirage. The deal is expected to close within the next two months.
Known as thrifty and deliberative, Carlino doesn't overbuild a casino for the sake of ego, those who work for him say. In an interview, he deflected questions about himself, preferring to give credit for the company's success to his top management team. He lets senior managers run their properties, and describes himself as "manic" about paying off debt.
"For me, it's a process of constantly scanning the universe in a fairly rigorous way to figure out what might be out there," Carlino said of his approach to growth, "or what's there that's not really available but we'll find a way to make it available."
Earlier this month, Carlino presented plans for a $240 million horse racing and slots complex in Grantville, just outside Harrisburg, at a closed-door session before the Pennsylvania Horse Racing Commission.
For the last decade, Carlino and Penn National had lobbied to get slots legislation passed to revitalize the state's horse racing industry, which has had double-digit declines in revenue and attendance during that period. Over those 10 years, the company's political action committee contributed $184,000, with almost half given in 2001 and 2002 during Pennsylvania's last gubernatorial election. Campaign contribution records show that Carlino - who received total compensation of more than $14 million in 2004 - tends to give through the Penn National PAC.
Last year, the Legislature passed and Gov. Rendell signed into law, a measure to allow up to 61,000 slot machines in 14 locations across the state, including at seven racetracks. Penn National owns the Grantville site - called Penn National Race Course - and is positioned to be at the forefront of what state officials hope will be a multibillion-dollar gambling industry.
Carlino said the Grantville site will be similar in design to Charles Town Races & Slots, the company's flagship property in Jefferson County, W. Va., and its biggest moneymaker.
Like Charles Town, the Grantville racino will have a Hollywood-themed casino floor; a food court with four restaurants; a 400-seat buffet; a restaurant overlooking the racetrack; a 2,000-space parking garage; and a simulcast area for dog and horse races. When it opens in early 2007, Grantville will have 2,000 slot machines.
Carlino said the company's typical customer has an average household income of $55,000, is more likely to be female, and wagers an average of $55 per visit.
"It's not a huge amount," he said. "They have one goal, and that's to have a good time."
To ensure their return, Carlino is less interested in decorating his gambling parlors with great works of art, than with good food, solid entertainment and convenient parking.
"Look, we're in the customer service business, and making people happy is what we need to do to keep them coming back," Carlino said in a recent conference call. He made the remark in response to an analyst's question about how many slot machines would be out of service while a buffet was being added at Charles Town.
In 1997, Penn National purchased Charles Town, which had halted racing the year before, for $18 million. Last year, it generated operating income of $96 million on $400 million in revenue - the highest among its properties.
"This is the engine," John Finamore, senior vice president of regional operations at Charles Town, said. "It certainly opened doors for the company."
Finamore said he remembers meeting Carlino in summer 2000 when he came to check on a pair of properties that Station Casinos had put up for sale. Finamore was then Midwest president for Station, and knew little of Penn National.
"He said to me: 'We're a small company right now, but I'm determined to grow this company. I think we can be up there with the big guys,' " Finamore said. Carlino eventually recruited him to run Charles Town.
The "big guys" were Caesars, Harrah's, MGM, Mirage and Mandalay. Only two remain. MGM acquired Mirage in 2000, and acquired Mandalay in April. Harrah's bought Caesars in June.
Penn National has been on its own acquisition binge since 2000. It was named one of the country's 100 fastest growing companies by Fortune magazine last week, the fifth year in a row it made the list.
Last year, Carlino aggressively pursued Argosy.
"He is a tough negotiator," Argosy CEO and president Richard J. Glasier said, "but when he makes a commitment, he follows through."
For many years, Carlino helped his father, Peter D. Carlino, run the family horse racing business. In 1972, he founded Mountainview Thoroughbred Racing Association to operate one of the state's original thoroughbred racetracks at Penn National Race Course.
Inside Peter M. Carlino's office in Wyomissing, there are several pictures of horses. His father, now 84, retired, and living in Blue Bell, said his son never had an affinity for the animals.
"He couldn't tell a horse from a rabbit," he said. "We were just businessmen."
But Peter M. never lacked drive and initiative, his father said. He went to St. Madeleine Sophie (now Holy Cross), a Catholic elementary school in Germantown, and later graduated from Malvern Prep and Pennsylvania State University.
Carlino's mother died in 1971. He and his father remain close, and speak every couple of days.
"The Bible says the son shall exceed the father. I've told Peter he's gone too far," the elder Carlino said, adding that he often kids his son about his success.
The outlook wasn't so bright in the late '70s. Pennsylvania's horse racing industry was struggling with new competition and high gas prices that discouraged people from coming out to the tracks.
"It was dying off, and I was losing my fanny," Peter D. Carlino said. "Before, we'd have 50 to 60 buses at the track. By the late '70s, when the lottery came in and Atlantic City opened up, we couldn't get anybody."
In 1982, Peter M. left the family racing business to become a home builder in the Wyomissing and Reading area. He remains chairman of Carlino Development Group L.L.C., which develops, builds and operates residential and commercial real estate, mostly in central Pennsylvania.
Penn National opened the state's first off-track betting parlors in 1991, which provided cash to expand the company. In 1996, two years after Carlino returned as CEO to take it public, it acquired Pocono Downs, a harness racetrack in Wilkes-Barre, for $48.9 million. In January, it sold Pocono Downs for $280 million - a return of nearly five times its investment - to the Mohegan Tribal Gaming Authority because Pennsylvania restricts how many gambling licenses a company can own.
"They are remaining 100 percent regional versus their larger competitors who have increased their exposure in major markets, like Las Vegas and Atlantic City," Deutsche Bank gambling analyst Marc Falcone said.
Atlantic City casino operators have noticed Penn National's explosive growth. Not coincidentally, Atlantic City has been trying to reduce its reliance on daytripper bus customers and low-end slots players, while companies like Penn National have been more than happy to cultivate them.
"They've been very aggressive, and have acquired great assets," said Robert L. Boughner, chief executive of the Borgata Hotel Casino & Spa.
Pennsylvania, which could begin awarding slots licenses in 2006, presents a challenge with its 54 percent tax rate on gambling revenue. But Penn National has managed to turn a profit in other tough tax environments, like West Virginia, which has a 60 percent tax rate, and Illinois, which recently rolled back its rate from 70 percent to 50 percent.
Carlino is confident that slots revenue will sustain expansion of his racetracks, racinos, riverboat casinos, parimutuel operations, and off-track betting parlors.
But no matter how big Penn National Gaming becomes, Carlino has no plans to uproot it for the neon lights of Vegas or Atlantic City anytime soon.
"As long as I'm alive, we're not planning to leave town," said Carlino, who has lived in Reading with his family since 1969. "This is home."
Contact staff writer Suzette Parmley at 215-854-2594 or email@example.com.
Down the Stretch
Penn National will soon complete its $2.2 billion acquisition of Argosy Gaming, in a transaction that will create the world's third-largest gambling company. Penn National will pay $47 for each share of Argosy common stock and assume $800 million in Argosy debt.
Headquarters: Wyomissing, Pa.
Focus: Owns and operates racetracks, racetracks with slots, casinos, and off-track betting facilities.
Locations: Colorado, Illinois, Louisiana, Maine, Mississippi, New Jersey, Pennsylvania, and West Virginia; and a management contract in Ontario, Canada.
Employees: 12,126 full- and part-time as of March 7
Chief executive officer: Peter M. Carlino.
2004 revenue: $1.14 billion.
2004 net income: $71.48 million, or 86 cents a share.
Argosy Gaming Co.
Headquarters: Alton, Ill.
Focus: Owns and operates regional riverboat casinos.
Locations: Illinois, Indiana, Iowa, Louisiana, Missouri and Ohio.
Employees: 6,193 full- and part-time as of Dec. 31.
Chief executive officer: Richard J. Glasier.
2004 revenue: $1.04 billion.
2004 net income: $61.5 million, or $2.07 a share.
SOURCE: Securities and Exchange Commission filings
Peter M. Carlino
Title: Chairman and chief executive officer of Penn National Gaming Inc. He is also chairman of Carlino Development Group L.L.C., a real estate business.
2004 total compensation: $14.05 million.
Other boards: The Milton S. Hershey Medical Center in Hershey, Pa.
Education: Bachelor's degree in general arts and sciences, Pennsylvania State University, 1969.