According to Reuters, Boyd Gaming has approached Penn Entertainment with a proposal to acquire the company. The company has a market value of over $9bn, including debt – according to the sources (although its official market capitalisation is currently $3bn).
This potential acquisition, if it proceeds, would be one of the largest mergers in the US gambling sector since Eldorado Resorts' $17.3bn purchase of Caesars Entertainment in 2020.
Following the news, Penn's shares surged 8% to $19.89 on Thursday afternoon, while Boyd's stock fell 3% to $51.90. The market reactions reflect the potential complexities and challenges of the deal.
For Boyd to succeed in acquiring Penn, it would need to secure substantial financial backing and obtain regulatory approval from officials in multiple states where both companies operate.
Additionally, Boyd would need to navigate its relationship with Walt Disney as Disney’s ESPN network has an existing $1.5bn licensing agreement with Penn for the ESPN Bet brand.
Penn Entertainment operates 43 casinos and racetracks across 20 US states and offers online sports betting and casino gambling. The company has made investments in its digital presence, including acquiring Barstool Sports for $550m, which was later sold back to its founder for $1.
Additionally, Penn purchased Canada's Score Media and Gaming for $2.1bn in 2021. However, some activist investors, like Donerail Group, have criticised these expenditures and called for Penn to consider a sale.
Despite this, analysts from Truist Securities recently suggested that Penn is unlikely to change its operational strategy in the near term, given its current focus on the ESPN Bet product and the upcoming football season.
Boyd Gaming, based in Las Vegas, operates 28 gaming properties in 10 US states, manages a tribal casino in northern California and has an online gaming business.
The company also holds a 5% stake in FanDuel Group, a sports-betting operator. Boyd's recent strategic moves include the appointment of Michael Hartmeier to its Board of Directors, leveraging his experience in gaming and investment banking.
A merger between Boyd and Penn would require approval from various stakeholders, including gaming regulators and landlords such as Gaming & Leisure Properties (GLPI.O). Overlapping operations in some states could necessitate divestitures to satisfy regulatory requirements.
