Las Vegas-Based Boyd Gaming Could Be Buying Penn Entertainment 

Boyd Gaming may be looking to buy out ESPN Bet operator Penn Entertainment in a $9 billion deal. That’s according to unnamed company insiders who spoke to Reuters in recent days.

If the deal does go through, it would be the gambling world’s biggest purchase since 2020, when Reno-based Eldorado Resorts paid $17.3 billion to buy out and then merge with Las Vegas’ Caesars Entertainment. 

Penn Entertainment operates 43 casinos across 28 states, including the M-Resort in Las Vegas. It also runs the ESPN Bet online sportsbook and casino, having licensed the veteran sports broadcaster’s brand name in 2023. 

Boyd Gaming has been based in Nevada since it was founded by Bill Boyd in 1979. It operates 28 casinos in 10 states, including a dozen in the Las Vegas area. Even if the takeover doesn’t go through, Penn’s M-Resort is rumored to be one of the properties planned for sale, and Boyd could be a ready buyer. 

Potential Sale 

The Reuters report said that Boyd, the smaller company by all metrics, is preparing a $9 billion takeover offer for Penn. The Pennsylvania-based operators’ shares jumped 8% on Thursday after the initial news broke,

Penn has had a difficult period between 2022 and now. It has spent big on online gambling, but failed to gain much market share against the dominant operators, DraftKings and FanDuel. 

Despite an explosive start that saw it gain the most downloads of any U.S. betting app in an opening week, Penn’s $1.6 billion investment on the ESPN Bet brand has seen it barely get above 2% online gambling market share nationally. That’s compared to 75% of the market shared by DraftKings and FanDuel.

The speculation about a fire sale at Penn was also fueled by last month’s letter from major company shareholder Donerail Group to Penn’s board of directors, which recommended that the operator look to sell up at least some of its business in the immediate future. 

At the same time, Boyd Gaming made a new appointment to its own board of directors that raised some eyebrows. 

The casino operator added former investment banker and experienced dealmaker Michael Hartmeier to the company board. Hartmeier has previously worked in the hospitality divisions of Lehman Brothers and Credit Suisse.

Banking experience may be essential for Boyd if it plans to take over Penn, as the smaller company will require significant financial investment to afford the reported $9 billion price tag. 

Penn’s Woes 

Investors are apparently not happy at the returns on the $4 billion spent on the sports betting space since acquiring Barstool Sports in 2022. It then axed the brand after two years and sold it for $1 to original owner Dave Portnoy, only to spend $1.4 billion picking up the ESPN Bet license. 

As of this writing, even after the recent rally, shares are down a precipitous 84.8% off their peak in 2021. Penn is trading at around $20 per share this week. But back in March 2021, it hit a high of $130.47. 

After a short bump from the launch of ESPN Bet, shares started dropping again in February. They sit 21% down, compared to just six months ago.

During that time, Penn announced a $206 million investment in M-Resort, as well as a combined $285 million on expanding its Hollywood Casinos in Joliet, Illinois, and Columbus, Ohio. 

However, despite initial optimism, it eventually became clear that ESPN Bet had not met financial expectations. And it had spent big on promotions, too.

Penn’s Q1 2024 financial report revealed it made an adjusted loss of $196 million over the quarter. That contributed to the company making an overall $114.9 million loss, further worrying shareholders. 

Boyd Booming 

Meanwhile, Boyd Gaming has been benefiting from the booming Las Vegas market over the past few years. To the extent that its performance this year saw slight year-on-year declines from the record 2023, despite continuing to make considerable profits. 

The operator reported Q1 2024 revenues of $960 million, from which it made $330 million in adjusted income. 

However, its on-hand cash balance of $283.5 million is far short of the $9 billion it is reportedly considering to offer for Penn Entertainment. So some significant borrowing would be needed if the deal is to go through. 

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