Boyd Gaming’s play to acquire Penn Entertainment called “ridiculous”

June 24, 2024 8:14 PM
Photo: Shutterstock
  • Buck Wargo, CDC Gaming Reports
June 24, 2024 8:14 PM

Shares of Boyd Gaming have rebounded since a Reuters report surfaced Thursday of the Las Vegas-based company’s interest in acquiring regional operator and rival Penn Entertainment. After falling below $52 after the report Thursday, Boyd closed at $54.59 on Monday.

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Penn’s shares, which jumped 8% Thursday afternoon to just over $20, closed Monday at $19.34.

The deal would be the largest merger between U.S. gambling operators since the $17.3 billion acquisition of Caesars Entertainment by Eldorado Resorts in 2020.

Reports called such a merger a challenge since Boyd, as a smaller operator, would need “financial firepower” to clinch a deal. Nevada gaming regulators and those from other states would need to approve the deal and the Walt Disney Company was cited as an obstacle, given Penn’s licensing deal with ESPN for ESPN Bet.

One gaming-industry consultant called the report “ridiculous” and said that individual property sales by Penn would be more likely.

The Las Vegas Review-Journal reported last week that the Penn-owned M Resort in Henderson is under the investment community’s microscope after an investor told the board of directors that it should sell all or part of the property.

“Penn is still the most active topic in our coverage, given the public activist letter,” said David Katz, an analyst for Jefferies Equities Research. “Boyd’s recent board appointment, along with an unconfirmed report from Reuters about an acquisition approach and ongoing commentary from Penn management and other entities presumed to be contemplating an offer, continue to draw attention. Following meetings with Penn management last week at our Nantucket conference, we continue to think some change is inevitable, given conflicting views between investors and the company.”

Penn operates 43 casinos in 20 states.

Gaming consultant Brendan Bussmann, managing director of B Global, called the idea of Boyd and Penn merging “almost ridiculous.”

Bussmann said he’d be surprised if Penn’s entire company went up for sale. “I don’t see all of Penn being bought out, especially by Boyd. It would be too difficult for a host of reasons. While it sounds good on the surface, it doesn’t in the end get to the reality of how this would work.

“That doesn’t mean there aren’t assets out there that Penn may sell at some point,” Bussmann said. “That’s the case with any major company, whether someone wants to come and purchase an asset.”

In other news, in his note to investors, Katz cited the Eilers & Krejcik quarterly slot and table forecast that indicated slot sales are expected to decrease by 2% to 91,400 games this year. U.S. and Canada sales were flat year over year, in line with pre-COVID levels.

Bussmann said the forecast shouldn’t worry anyone about the industry’s thoughts about the economy going forward.

“All of that adjusts over the course of time and how people reconfigure their floors and what they feel is best to get the player mix in place to serve their properties,” Bussmann said. “I don’t see that as monumental. If you saw a more significant drop, that would be different.”

According to Eilers Online Performance Report, IGT led all the online gaming suppliers in gaming-revenue market share in May at 18.2%.

“This marks the first time IGT has jumped to first place, beating Evolution for the first time since 2021,” Katz said. “In addition, Light & Wonder has the highest number of top-performing online slot games with 20.4% of the best-performing games belonging to them. Finally, Everi placed fifth in terms of gaming revenue market share, at 5.8%. In short, the report is bullish for IGT (-25.5% year to date) and supportive for Light & Wonder (+24.3% year to date).”