Exclusive-Boyd Gaming makes takeover approach for Penn Entertainment, sources say | WTAQ News Talk

By Milana Vinn and Anirban Sen

NEW YORK (Reuters) – U.S. casino operator Boyd Gaming has approached Penn Entertainment to express interest in acquiring its competitor with a market value of more than $9 billion, including debt, according to people familiar with the matter.

Shares of Penn rose 8% to $19.89 in New York on Thursday afternoon after Reuters reported Boyd’s approach. Boyd’s stock fell 3% to $51.90.

A deal would be the largest merger between U.S. gambling companies since Eldorado Resorts acquired Caesars Entertainment in 2020 for $17.3 billion.

It would be challenging because Boyd, the smaller company with a market value including debt of $7.8 billion, would need financial firepower to close a deal. The companies would also need the blessing of regulators and officials in several states where they both operate.

Boyd would also have to win over Walt Disney, which has a partnership with Penn through its sports network ESPN.

The sources said there was no certainty that Penn would enter into 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 in 20 U.S. states, according to its website. It also offers online sports betting and online casino gambling at various locations.

Last year, Penn struck a $1.5 billion licensing deal with Disney, allowing the casino operator to use the ESPN brand in its online sportsbook. As part of the deal, Penn’s rights to the ESPN Bet brand will initially last 10 years, while ESPN has been given rights worth approximately $500 million to purchase Penn stock.

The early success of the ESPN deal has given Penn CEO Jay Snowden a boost after a failed acquisition. Penn spent $550 million to acquire Barstool Sports and sold it back to founder Dave Portnoy for $1 last year.

Penn also acquired Canada’s Score Media and Gaming in 2021 for $2.1 billion.

Some activist investors, including Donerail Group, have criticized Penn for spending billions of 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 Penn management was unlikely to abandon its operating plan to explore a sale.

“Despite the activist letter, we do not believe any form of formal strategic review at Penn with a clear ESPN Bet product roadmap is likely in the near term; football season in sight; and higher/volatile interest rates continue to impact overall M&A activity 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 FanDuel Group.

A combination between Boyd and Penn would require approval from several parties other than Disney, including state gaming regulators and landlords such as Gaming & Leisure Properties.

Boyd’s casino operations overlap with Penn’s in some states, so Boyd would likely be forced to divest some operations in those locations as well, the sources said.

(Reporting by Milana Vinn and Anirban Sen in New York; Editing by David Gregorio)