Penn Pops on Rumor of Flutter Joining Boyd in Takeover Bid

• Gambling
• 05 July 2024

On a varied day for gaming stocks, Penn Entertainment (NASDAQ: PENN) gained 4.70% following a report that Flutter Entertainment (NYSE: FLUT) is thinking about collaborating with Boyd Gaming (NYSE: BYD) in a takeover offer for the regional casino operator. 

Boyd's alleged pursuit of Penn, which neither party has publicly acknowledged, dates back several weeks, but the news of Flutter's possible involvement is recent and was first reported today by TheDeal. Referencing unnamed sources, the outlet reported that Flutter, the owner of FanDuel, might collaborate with Boyd, serving as a purchaser of Penn’s digital assets, such as ESPN Bet. 

That conjecture appeared fewer than three weeks after news broke that Boyd was considering an offer of at least $9 billion for competitor Penn. The potential inclusion of Flutter makes sense, as Boyd has maintained a long-term relationship with the Irish gaming firm. The regional casino operator located in Las Vegas possesses 5% of FanDuel. 

How Flutter Might Assist Boyd in Finalizing Penn Deal 

Speculations about Boyd's possible interest in Penn have been circulating for nearly a month, and during this period, experts have consistently dismissed the ideas that Penn is eager to sell and that Boyd could easily carry out a transaction of $9 billion or more. 

Several analysts have observed that a challenge in Boyd acquiring Penn is that the bidder may be unwilling to pay for ESPN Bet, necessitating the involvement of a third party to purchase Penn's interactive division. If that party comes forward and might propose at least $500 million for Penn's digital gaming division, it would lower the per share price Boyd would have to present to persuade Penn to enter negotiations. 

Boyd may be interested in Penn’s terrestrial casino holdings, but it likely has no desire for ESPN Bet and associated components. Flutter may find those entities useful. 

ESPN Bet holds about 6% of the market share in online sports wagering, and under the Hollywood Casino brand, Penn possesses the means to make a significant impact in iGaming. Those might be attractive qualities for Flutter. 

Flutter Might Assist, But Won't Resolve All Problems in Potential Boyd/Penn Agreement 

Acquiring Penn’s interactive operations would help Flutter in reducing costs for the regional casino operator, which would make a proposal more appealing for Boyd, yet that’s merely one obstacle. 

Despite the removal of ESPN Bet and Hollywood Casino from the equation, a Boyd purchase of Penn would probably take time to complete due to regulatory intricacies. The two firms run regional casinos in numerous identical states. According to various estimates, the agreement would need the approval of at least 10 states' gaming regulators as well as the Federal Trade Commission (FTC). 

This means that prior to Boyd and Penn being able to sign the agreements, it was probable that one or both would need to dedicate themselves to asset sales in specific states — primarily in the Midwest and the South. Selling assets may be challenging to accomplish in the short term because of elevated interest rates and limited consumer spending in certain regional gaming markets.