Boyd Gaming reportedly makes a play for Penn Entertainment

Penn Entertainment is being courted by Boyd Gaming in what could prove to be one of the biggest M&A moves for the gambling industry in 2024, according to people familiar with the matter, as reported by Reuters.

Markets react to news that Boyd is attempting to buy out Penn

The media outfit has confirmed in a news excerpt that Boyd Gaming is potentially looking to buy out its rival, which has a current capitalization of $9 billion, including debt. The exact offer is still subject to speculation, but stock markets responded to the news, with Penn’s stock rallying 8% on Thursday to $19.89 whereas Boyd’s stock took a slight hit, and dropped to $51,90, down 3%.

Yet, there is a certain disparity in the acquisition initiative here, as Boyd’s market capitalization currently sits at $7.8 billion, below the size Penn commands. This means that Boyd would have to muster some impressive financial war chest to complete the deal if one indeed comes to pass.

Apart from addressing the purely financial terms, Boyd would also have to win over ESPN and Walt Disney, which are currently operating a sportsbook with Penn. As to whether Penn is actually interested, there is not much information as of right now. Sources told Reuters that Penn has shown no initiative and may not necessarily engage with the proposal in the first place.

Penn has had a bit of a bad run itself in recent years as well. The company somewhat notoriously purchased the Barstool Sports brand for $550 million only to sell it back to its founder, Dave Portnoy, for $1 in 2023, in what must have been one of the most shocking business decisions the industry has seen.

Activist investors on the offensive in Penn Entertainment

Meanwhile, Penn Entertainment shareholders have protested against the pay packages for the company’s CEO Jay Snowden and the company’s CFO, Felicia Hendrix. Out of the total, 44,367,517 of the votes were cast against the "excessive compensation package" of nearly $100 million that was allocated to the chief executive.

Although the majority of shareholders, 63,078,413 of the votes, did vote in favor, of the package at the recent Annual General Meeting, the company is showing signs of internal strife that could worsen its prospects if it spreads.

Activist investors, such as the Donerail Group, have already called on Penn Entertainment to consider a sale to restore shareholder value, criticizing the company for its purchases, including the Barstool Sportsbook fiasco.

Yet, as Penn Entertainment is only getting a taste of the ESPN Bet brand synergies, the company may be inclined to wait for the new football and sports season in the United States to be over before it considers any exit options.

Penn has habitually courted interest from powerful backers, including HG Vora Capital Management as recently as January.

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