Boyd Gaming eyes $9 Billion acquisition of Penn Entertainment

Investing.com - Boyd Gaming (NYSE:BYD), a renowned casino operator in the US, has expressed interest in acquiring its counterpart, Penn Entertainment.

The acquisition, valued at over $9 billion, including debt, could mark the most significant merger in the American gambling industry since Eldorado Resorts (NASDAQ:ERI)' $17.3 billion purchase of Caesars (NASDAQ:CZR) Entertainment in 2020.

However, the potential merger comes with its share of challenges. Boyd Gaming, being the smaller entity with a market value of $7.8 billion inclusive of debt, would need substantial financial backing to secure the deal.

Furthermore, the merger would require approval from multiple regulatory bodies and officials across several states where both companies operate.

Another hurdle for Boyd Gaming would be to secure the support of Walt Disney (NYSE:DIS), which maintains a partnership with Penn Entertainment through its sports network, ESPN.

Insiders have stated that there's no guarantee that Penn will enter into negotiations with Boyd, asking to remain anonymous due to the confidential nature of the matter.

Penn Entertainment, which operates 43 casinos and racetracks across 20 U.S. states, also provides online sports betting and online casino gambling in various locations. In 2021, Penn entered a $1.5 billion licensing agreement with Disney that permits the use of ESPN's brand in its online sportsbook. This deal has not only boosted Penn's CEO Jay Snowden's standing but also granted ESPN rights worth around $500 million to purchase Penn stock.

Despite the early success of the ESPN deal, Penn has faced criticism from activist investors like Donerail Group. The group has questioned Penn's substantial investments in its digital business without strong return prospects, urging the company to consider a sale.

Boyd Gaming, headquartered in Las Vegas, operates 28 gaming entertainment properties across 10 US states, manages a tribal casino in northern California, and runs an online casino gaming business. It also holds a 5% stake in sports-betting operator FanDuel Group.

In addition to Disney's approval, the potential merger between Boyd and Penn would require consent from various stakeholders, including gaming regulators in several states and landlords like Gaming&Leisure Properties. Given that Boyd's casino operations overlap with Penn in some states, Boyd might also be compelled to divest some operations in those locations.