Boyd Gaming makes acquisition approach to Penn Entertainment, sources say

Gaming and Leisure Properties

20/06/2024 20:25

By Milana Vinn and Anirban Sen
       NEW YORK, June 20 (Reuters) - U.S. casino operator Boyd
Gaming  BYD.N  has approached Penn Entertainment  PENN.O  to
express interest in acquiring its peer, valued at more than $9
billion, including debt, according to people familiar with the
matter. 
    The potential combination would be the biggest merger among
U.S. gambling companies since Eldorado Resorts' $17.3 billion
acquisition of Caesars Entertainment  CZR.O  in 2020.
    It would be challenging since Boyd, the smaller company with
a market value including debt of $7.8 billion, would need
financial firepower to clinch a deal. The companies would also
need the blessing of regulators and officials in several states
where they both operate. 
    Boyd would also need to win over Walt Disney  DIS.N , which
through its sports network ESPN has a partnership with Penn. 
    The sources said there was no certainty Penn will engage in
negotiations with Boyd. They asked not to be identified because
the matter is confidential.
    Penn declined to comment. Boyd and Disney did not
immediately respond to requests for comment.
    Penn operates 43 casinos and racetracks across 20 U.S.
states, according to its website. It also offers online sports
betting and online casino gambling in several locations. 
    Last year, Penn struck a $1.5 billion licensing deal with
Disney that allowed the casino operator to use ESPN's brand in
its online sportsbook. As part of the deal, Penn's rights to the
ESPN Bet brand will initially run for 10 years, while ESPN has
been granted rights worth about $500 million to purchase Penn
stock. 
    The early success of the ESPN deal has bolstered Penn CEO
Jay Snowden after a soured acquisition. Penn spent $550 million
to acquire Barstool Sports only to sell it back to its founder
Dave Portnoy for $1 last year. 
    Penn also acquired Canada's Score Media and Gaming for $2.1
billion in 2021. 
    Some activist investors, including Donerail Group, have
criticized Penn for spending billions on dollars on its digital
business without prospects for strong returns, and have called
on the Wyomissing, Pennsylvania-based company to explore a sale.
 
    Last week, Truist Securities analysts wrote in a research
note that it was unlikely Penn's management would abandon its
operational plan to explore a sale. 
    "Despite the activist letter, we don’t think any sort of
formal strategic review at Penn is likely in the near-term with
a clear ESPN Bet product roadmap; football season on the
horizon; and higher/volatile interest rates still impacting
overall M&A for now," the Truist analysts wrote. 
    Based in Las Vegas, Boyd has 28 gaming entertainment
properties in 10 U.S. states, manages a tribal casino in
northern California, and operates an online casino gaming
business. It also has a 5% stake in sports-betting operator
FanDuel Group.
    A combination between Boyd and Penn would need the sign-off
from several constituents other than Disney, including gaming
regulators in the several states and landlords such as Gaming &
Leisure Properties  GLPI.O .
    Boyd's casino operations overlap with Penn in some states,
so Boyd would also likely be forced to divest some operations in
those locations, the sources said. 

 (Reporting by Milana Vinn and Anirban Sen in New York; Editing
by David Gregorio)
 ((Greg.Roumeliotis@thomsonreuters.com; +1 646 223 6022; Reuters
Messaging: greg.roumeliotis.thomsonreuters.com@reuters.net))