Boyd Gaming’s Potential Acquisition of Penn National: Analysts Skeptical
Boyd Gaming’s potential takeover offer for Penn National doesn’t come as a surprise to many analysts, but the likelihood of a deal actually happening remains uncertain. Analyst Carlo Santarelli from Deutsche Bank believes that while Boyd Gaming could be a logical suitor for Penn, it doesn’t guarantee that a transaction will take place, nor is there confirmation that Penn is willing to sell.
Recent media reports suggested that Boyd is in talks with Penn regarding an acquisition that could value the target at over $9 billion. However, Santarelli speculates that if Boyd has indeed made an offer, it would likely be in the range of $25 to $30 per share, valuing Penn at around $4.54 billion based on its outstanding shares. This offer is expected to be rejected by Penn, according to the analyst.
One key point of discussion following the Boyd/Penn rumor is what would happen to Penn’s online sports betting arm, ESPN Bet, if Boyd were to acquire the company. Given Boyd’s existing stake in FanDuel, analysts believe that Boyd would likely sell off ESPN Bet to another buyer if the acquisition were to go through, potentially making a lower offer more acceptable to Penn shareholders.
Santarelli also outlines several potential scenarios in which Boyd could integrate Penn, including maintaining the target’s operating losses, eliminating redundancies, and divesting overlapping assets to a third party. However, any potential acquisition is likely to result in the sale of various physical casinos owned by the companies.
Another complicating factor in a Boyd/Penn merger is Penn’s substantial fixed rent expenses, as the company does not own the real estate on which its casinos are located. This could pose challenges in the deal, especially considering Boyd’s preference for property ownership. Additionally, regulatory approval from both the FTC and multiple state gaming regulators would be required for the acquisition to move forward.
Overall, while the possibility of Boyd Gaming acquiring Penn National is generating significant interest in the market, analysts remain skeptical about the likelihood of a deal being finalized. The complexities surrounding potential divestments, regulatory approvals, and financial considerations make the path to a successful acquisition far from certain. Investors will be closely watching for any further developments in this ongoing saga between Boyd and Penn.
