Rumors have been circulating for a while, but recent reports from Reuters confirm that Boyd Gaming has approached Penn Entertainment with a buyout offer. If the deal, valued at around $9 billion, goes through, it could significantly impact the Pennsylvania (PA) online and retail casino landscape, given Penn’s extensive operations in the Keystone State.
Which PA Casinos Would Be Affected?
Penn Entertainment currently owns 43 casinos and racetracks across 20 states, with four key properties in Pennsylvania: The Meadows, York, Morgantown, and Penn National Racecourse. These establishments are popular among PA gamblers, and a Boyd takeover would bring notable changes.
Likelihood of the Buyout
The possibility of a buyout is still uncertain. While Boyd Gaming has made an offer, there is no guarantee that Penn Entertainment will proceed with the deal. Additionally, Penn comes with a substantial debt of approximately $7.8 billion, which would need to be absorbed by the buyer. Another potential obstacle is Penn’s licensing deal with Walt Disney to use the ESPN brand, which includes a $500 million clause for ESPN to purchase Penn stock.
Despite these challenges, Penn’s recent performance has been lackluster. For example, the Pennsylvania Gaming Control Board (PGCB) reported a 1.62% decline in slot machine revenue and an 11.11% decrease in table games revenue at Hollywood Casino at Penn National Racecourse in May compared to the same month last year.
Flutter’s Interest
Adding another layer to the potential acquisition, Flutter, the owner of FanDuel, has shown interest in partnering with Boyd Gaming to acquire Penn Entertainment. Under this arrangement, Boyd would take over Penn’s retail gambling business, while Flutter would control ESPN BET. This partnership could reshape the sports betting market in Pennsylvania, where FanDuel already leads.
Market Impact
Acquiring ESPN BET would further bolster Flutter’s position in the PA sports betting market. Despite ESPN BET holding the third-largest handle in Pennsylvania in 2024, its market share has been declining each month. The addition of ESPN BET to Flutter’s portfolio could help reverse this trend.
Stakeholder Reactions
Top shareholders, like The Donerail Group, have voiced concerns about Penn’s current direction, pointing to a significant drop in stock value and a series of missed performance targets. In response, Truist Securities recently stated that Penn’s stock is undervalued, setting a target price of $23-$25. Boyd Gaming’s bid in June further underscores the potential for significant changes in the gaming industry.
Challenges and Opportunities
The potential acquisition presents several challenges, especially in states where both Boyd and Penn have strong presences, such as Louisiana, Indiana, and Missouri. Navigating these complexities will require strategic adjustments and possible divestitures.
Upcoming Developments
Boyd Gaming, Penn Entertainment, and Flutter are all set to release their second-quarter earnings in the coming weeks. These reports will provide valuable insights into the viability and potential impact of the acquisition. The Penn earnings call, in particular, will reveal the progress of ESPN BET in capturing more digital gaming market share.
