Boyd Gaming’s Possible acquisition of Penn Entertainment and its implications

Lea Hogg June 25, 2024

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Boyd Gaming’s Possible acquisition of Penn Entertainment and its implications

Boyd Gaming has recently expressed its interest in acquiring Penn Entertainment, another significant entity in the same sector. This news, reported by Reuters, has stirred up the market, leading to notable changes in the companies’ stock prices and raising several questions about the future of both firms. Penn Entertainment, a company with a market value exceeding $9 billion, including debt, witnessed an 8 percent rise in its share price to $19.89 following the announcement. On the other hand, Boyd Gaming experienced a 3 percent drop in its stock price, which fell to $51.90. Despite the initial market reaction, the success of this acquisition is contingent on several factors.

For Boyd Gaming to successfully acquire Penn Entertainment, it would need to secure substantial financial backing. Moreover, it would have to obtain regulatory approval in multiple states where both companies operate. This is a significant hurdle, as overlapping operations might necessitate divestitures to meet regulatory requirements.

Another critical aspect that Boyd Gaming would need to consider is its relationship with Walt Disney. This is because Disney’s ESPN network has a $1.5 billion licensing agreement with Penn for the ESPN Bet brand. The implications of this agreement on the proposed acquisition are yet to be determined.

Possible outcomes

Penn Entertainment, with its operations spread across 20 US states, runs 43 casinos and racetracks. It also offers online sports betting and casino gambling, indicating a strong digital presence. This was further bolstered by its acquisition of Canada’s Score Media and Gaming for $2.1 billion in 2021.

On the other hand, Las Vegas-based Boyd Gaming operates 28 gaming properties across 10 US states and manages a tribal casino in northern California. It also has an online gaming business and holds a 5% stake in Flutter’s FanDuel Group.

Costly errors in sports betting sector

Penn Entertainment’s shares recently saw a significant increase, spurred by an investor letter from the Donerail Group. The letter, written by Donerail’s Managing Partner Will Wyatt, criticized Penn for its costly mistakes in the online sports betting sector and excessive CEO compensation. It suggested that selling the company could potentially double its current market value. However, analysts, including JPMorgan’s Joseph Greff, remain skeptical about a potential sale. Despite this, there are reports of potential interest in Penn, with Boyd Gaming mentioned as a possible suitor. However, Boyd, which owns a 5 percentstake in FanDuel and has a significant presence in Las Vegas, has not indicated any plans for large-scale acquisitions. The letter also highlighted Penn’s costly errors in the online sports betting industry, which have overshadowed its impressive portfolio of regional casinos. Analysts suggest a reassessment of the current investment path and returns is needed, given the competitive digital landscape and shareholders’ limited tolerance for the costs of interactive expansion.

The proposed acquisition of Penn Entertainment by Boyd Gaming could potentially reshape the landscape of the gaming industry. However, the success of this venture hinges on several factors, including financial backing, regulatory approvals, and the management of existing agreements and operations. As the situation unfolds, stakeholders and market watchers are keenly observing the developments, waiting to see how this strategic move plays out.

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