Reuters is reporting that Boyd Gaming reached out to PENN Entertainment regarding a potential buyout of the Pennsylvania-based company. Neither company immediately responded to PlayPennsylvania‘s request for comment.
There has been pressure mounting on PENN Entertainment to sell amid recent struggles with its online gambling product. ESPN BET has not lived up expectations in the Keystone State, which is coming off a failed investment in Barstool Sports.
With PENN Entertainment valued around $9 billion, it could be the most significant acquisition in the history of American gambling.
Could Boyd Gaming complete a sale of PENN?
Boyd Gaming, along with PENN, is one of the larger gambling companies in the US. It owns 28 properties across 10 states, including Valley Forge Casino in King of Prussia, and owns a 5% stake in FanDuel, the market leader in sports betting.
A potential buyout would give Boyd an even bigger footprint in the Keystone State, operating the following PENN/Hollywood casinos:
- Penn National Race Course
- The Meadows
- York
- Morgantown
Boyd would have a few obstacles in buying PENN. For starters, it is the smaller company, valued at $7.8 billion. The company would need strong financial backing to secure a deal.
Boyd would also need the approval from regulators in the states it already operates in, along with Walt Disney’s blessing, which is involved in the ESPN BET-PENN partnership.
Reuters is reporting that there is “no certainty” PENN engages in any buyout talks with Boyd. From previous reports and earnings calls, PENN CEO, Jay Snowden, appears laser focused on improving ESPN BET during the upcoming football season.
During a Q1 2024 earnings call last month, Snowden foreshadowed improvements to ESPN BET which include deep integration with the ESPN app and ESPN fantasy app to convert players.
PENN’s stock rises after potential sale report
Speculation of a potential PENN buyout started to gain momentum when Boyd hired Michael Hartmeier to its board last week. Hartmeier completed several financing and advisory assignments for gaming companies, totaling $125 billion across 25 years.
The acquisition conjecture rose PENN’s stock price 13% at one point last week. However, sources told the Earnings+More newsletter that the Hartmeier hire was a coincidence and that potential sale was not imminent. The stock dropped 11% last Friday, after the newsletter was released in the morning.
When news of Boyd’s potential interest in a merger circulated Thursday afternoon, PENN’s stock price jumped 8% before close. As of Friday morning, it’s down just 2.6%. On the other hand, Boyd’s price slipped 3.3% at Thursday’s close, but is up 1.2% since Friday’s open.
It’s certainly looking possible that the Hartmeier hire was calculated move on Boyd’s part.
Recapping turmoil surrounding PENN
While the results of PENN’s digital investments of Barstool and now ESPN are public, it’s no secret that these latest partnerships haven’t worked. To be fair, PENN and ESPN are still in the early stages.
However, that hasn’t stopped prominent investors from voicing frustrations. The Donerail Group started the buyout chatter after publishing a letter addressing concerns and the direction of PENN. Part of the letter said:
“Given our understanding of the Company’s assets, however, alongside an understanding of the industry participants’ current strategic appetite to grow inorganically, we do believe that a sale of the Company’s assets, if undertaken, could generate meaningful and certain value creation for equity investors.”
The letter also addressed the “exorbitant amounts of money” Snowden gets paid. Last week, one-third of investors rejected PENN’s executive compensation plans, involving Snowden and CFO Felicia Hendrix.
Should PENN continue to falter and investors remain frustrated, the company could reach a point where it has to sell. While Boyd is a top candidate, with reported interest, Earnings+More floated the idea of Hard Rock becoming another potential suitor.
It’ll be interesting to see if PENN Entertainment even makes it to football season with ESPN BET.
