Putting Penn to paper: Will Boyd Gaming acquire Penn Entertainment?

Following a few different meetings, appointments and other miscellaneous goings on in the industry, Gambling Insider analyses the potential acquisition of Penn Entertainment by Boyd Gaming.

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What is the deal with Boyd and Penn?

The latest developments within the gaming industry are pointing towards a major acquisition from Boyd Gaming offered to Penn Entertainment, with the deal estimated to have a market value of $9bn and an official market capitalisation of $8bn for the potential new firm. If Boyd secures the deal, it’ll be the biggest merger in North American gaming since Eldorado Resorts purchased Caesars in 2020 for $17.3bn. It’s not going to be an easy acquisition for Boyd, though, as there are a lot of moving parts both for and against this deal in the industry.

Boyd Gaming operates a healthy portfolio of North American properties, including resorts in Vegas, riverboats in Louisiana and a racetrack casino in Ohio. While this seems like it would be a good match on paper, this means that if Boyd acquired Penn Entertainment’s assets, going forward it would have four in Illinois, five in Missouri, seven in Mississippi and 10 in Louisiana. This has been flagged by everyone, from investors and business analysts, even down to customers in Las Vegas forums, who have all cried out at once in regards to breaches against federal antitrust laws.

While the deal is only speculated at the moment, this asks one big question – What about ESPN Bet?

This is the same problem that the aforementioned Eldorado and Caesars stumbled across in their acquisition, which means that a third party will likely have to come in and take some properties off their hands. Bally’s Corp would be the immediate and easy answer, but this company is currently embroiled in its own takeover talks with Standard General.

While the deal is only speculated at the moment, this asks one big question – What about ESPN Bet? There are too many directions this particular deal could go, but the decade-long deal with Disney requires $150m in annual payments for the ESPN branding.

How big is the potential of this acquisition?

It would be disingenuous to suggest this acquisition could be considered anything under ‘large.’ Penn Entertainment operates 43 properties across 20 US states, and has a slew of well-known brands, including Hollywood Casino, Ameristar and Boomtown. In addition to its land-based gaming, Penn Entertainment also manages several online gambling platforms, including ESPN Bet and theScore.

A table showing up-to-date market capitalisations of various US gaming brands, along with the potential for the Boyd/Penn merger.

While the market capitalisation for both companies is lower than many other competitors, this merger would bump them up to a combined market capitalisation of $8.06bn and place them on the board above big names, such as GLPI and Red Rock Resorts, and closer to those such as MGM and Caesars.

This wouldn’t be Boyd’s first foray into either land-based or online casinos, either. While we’ve covered the properties already quite extensively, Boyd also acquired Pala Interactive in March 2022 for $170m.

However, this would require Boyd to get clearance from Walt Disney, who currently hold a partnership with Penn Entertainment for ESPN Bet. This $1.5bn licensing agreement is for the ESPN brand, although it was a controversial move from the company. In a time where many sportsbooks were closing due to low numbers, the ESPN brand ensured that there would be a lot of exposure, coverage and attention on the platform. But the long-term question, of course, will be was this worth the money?

While it would be easier to ignore the existence of ESPN Bet and simply focus on the land-based casinos – one operator buying the properties from another operator – this deal has much more going on than this. Boyd has a 5% stake in FanDuel, another sports betting operator (and giant), which is something else that must be considered. As part of this deal, FanDuel was granted primary market access via sports betting licences at Boyd properties.

It’s also completely understandable that it would be looking to invest in more online assets; in the Boyd Gaming FY2023 report, its online revenue almost doubled year-on-year from $254m to $422m. In these reports, management explained that it would drive the iGaming vertical to bridge its land-based and online operations. So, is it completely out of the question to ask whether Boyd and FanDuel would be able to handle ESPN Bet better than Penn?

Following rumours of the deal last night, Penn Entertainment stocks rose 2.7% to $19.05, the highest it’s been in months. This also marks a 30% increase since the open letter from the Donerail Group and 10% since Hartmeier was appointed.

On the other hand, Boyd Gaming stocks also rose around 4%.

However, this would require Boyd to get clearance from Walt Disney, who currently hold a partnership with Penn Entertainment for ESPN Bet. This $1.5bn licensing agreement is for the ESPN brand, although it was a controversial move from the company. In a time where many sportsbooks were closing due to low numbers, the ESPN brand ensured that there would be a lot of exposure, coverage and attention on the platform. But the long-term question, of course, will be was this worth the money?

Who would win here?

The deal could be seen as an unusual one by some, especially as so many land-based properties would have to be sold to secure the deal, as well as the huge costs associated with the ESPN Bet platform. This isn’t a clean deal from Boyd’s end, so it’s important to consider who could actually win here.

First of all, one of the biggest ‘winners’ will be the operator who has the chance to buy multiple land-based casinos across North America at a reasonable price. It could be difficult to find a company willing to do this, but if there is one out there who had been looking to rapidly expand across several states, this is the opportunity.

With Bally’s unlikely, this could land on a Tribe like Mohegan, a regional property expert like Caesars or even each individual casino sold to a more local operator, rather than the leftover portfolio sold in one go. This could see a major tribal operator in each jurisdiction picking up a few properties each.

Another group of winners would be activist Penn investors, who have been calling for a management change and a sale of the company through every means possible. They’ve been writing open letters, swaying internal votes and everything else in between. If Boyd was to purchase Penn, this group would be getting all of their wishes granted in one go.

Why is this happening now?

On May 31 2024, Will Wyatt from Donerail Group penned an open letter to David Handler and the Board of Directors at Penn Entertainment. The six-page document went into detail discussing all of the issues with his management at the company. Donerail complained that the stock price was much lower that it should’ve been, and that “Penn’s suite of highly strategic casino assets alone could be worth more than double the company’s current market capitalisation.”

In June 2021, there were 115 million votes in support for David Handler and only 2 million withheld; by June 2024, there were 73 million votes for him and 34.3 million withheld. So, while nothing was seen on the surface, it seems like there’s been a changing tide against the Board from within Penn Entertainment for quite some time.

Highlights from the Donerail Group letter include:

- “After four years of effort, attention and billions of dollars of shareholder capital invested, the company has been unable to disintermediate the online sports betting landscape."

- “The growing pattern of guidance misses, alongside a demonstrated unyielding appetite to continue to invest in the company’s fledgling Interactive projects, irrespective of past results and without a clear return framework, has significantly damaged the credibility of this management team and Board of Directors.”

- “We question whether such credibility is beyond repair, as Penn’s shares are now down over 80% in the last three years because of such damage."

- “For these reasons, we respectfully ask the question: how can the Board continue to argue the benefits of operating as a standalone entity, which has thus far amounted to an overly risky and highly unprofitable gamble, in the face of what would likely be robust strategic appetite that could yield significant upside for investors?”

- “Since Mr Snowden assumed the role of CEO over four years ago, Penn stock has declined by more than 40% while its peers, on average, have gained more than 60%.”

- “One could reasonably ask whether Penn’s directors are really just riverboat gamblers, content with doubling down after each loss.”

The letter also went into detail regarding a few different financial transactions from the company. These include Penn Entertainment investing $163m to acquire 36% of Barstool Sports in January 2020. Despite lacklustre results, the company then bought the remaining shares in 2023 for $388m. Just six months later, it would sell Barstool sports for $1 (yes, one dollar). In 2021, Penn acquired theScore for $2.1bn; despite the media company turning over less than $25m in annual revenue and following the launch of ESPN Bet, the company reported an adjusted EBITDA loss of $333.8m.

It’s not just this one letter that shows some kind of discontent regarding leadership at Penn, either. The latest SEC filings from the operator cover its Annual Meeting, where out of the 129,215,217 shares of common stock, 44 million of these were used to vote against executive compensation of the company’s Named Executive Officers for the 2023 fiscal year. In comparison, there were only 10.7 million votes against this in June meeting from last year.

It wasn’t just the compensation that was affected either. In June 2021, there were 115 million votes in support for David Handler and only 2 million withheld; by June 2024, there were 73 million votes for him and 34.3 million withheld. So, while nothing was seen on the surface, it seems like there’s been a changing tide against the Board from within Penn Entertainment for quite some time.

When could this happen?

Boyd just appointed Michael Hartmeier to its Board of Directors, on June 10, to be specific. While this may seem like a standard change to its Board, Hartmeier has some specific experience in this field. When he’s joined companies in the past, each one has praised his experience in mergers and acquisitions, with a career portfolio of completing over $125bn in financing and advisory assignments in the past 25 years. He’s also worked for Barclays, DiamondRock Hospitality, Lehman Brothers and Credit Suisse First Boston.

“Penn’s suite of highly strategic casino assets alone could be worth more than double the company’s current market capitalisation.” - Will Wyatt, Donerail Group

Hartmeier joins Boyd from Full House Resorts, another casino operator based in the US. Full House Resorts appointed Hartmeier on December 4 2020, a year which had proved to be troublesome for the company, with stock prices falling as low as $0.77. A year after his appointment, the company hit a record high shares level of $12.11 – it would be foolish to attribute this success entirely to Hartmeier, but it’s telling all the same. A little like roles previously played by Tony Rodio, who was a successful Interim CEO at companies before they were taken over (such as Caesars).

While the shares have dropped somewhat since then to around $5, this has been steady and consistent for quite some time now; meaning that there is no specific reason for him to jump ship. In the announcement from Full House Resorts, which was posted within days of Hartmeier being appointed with Boyd, the operator said he had stepped down from his role with immediate effect: “His resignation is amicable, with no disputes cited, as he moves on to explore a new venture in the gaming industry.”

All of this lends itself to the belief that serious acquisition talks could begin immediately, if both sides are willing.

That being said, there are too many facets to this deal that could alter any part of it. There are the casino properties which would breach antitrust laws and would need to be sold, which would require a buyer to come forward; there’s ESPN Bet, which is licensed to Disney with a big financial commitment; there’s the rising mistrust against David Handler from investors, which could influence any business decisions going forward. There is simply too much going on at the moment to pin any single aspect of it down, but one thing is certain: somebody is betting on Penn selling up.


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