In an unexpected turn of events this Tuesday, Penn Entertainment’s (NASDAQ: PENN) stock values took an upward trajectory. This came hot on the heels of an announcement by its competitor, Boyd Gaming (NYSE: BYD), hinting at a possible acquisition of the regional casino operator. The appointment of Michael Hartmeier to Boyd’s board of directors, an extraordinaire player in the global gaming and finance arena, was the catalyst of the rumor mill.
A prominent figure within the industry, Hartmeier’s inclusion on the board comes with a replete background in critical roles within the banking and gaming sector. Prior to this, he had helmed prestigious positions at banking giants like Barclays, Lehman Brothers, and Credit Suisse First Boston. His legendary career in investment banking spanning 25 years marked over $125 billion worth of advisory and financing assignments. This colossal contribution included his work for numerous gaming companies, according to Boyd, which is headquartered in the gambling capital, Las Vegas.
Previously, Hartmeier also served as a board member at Full House Resorts (NASDAQ: FLL), another regional casino operator, bolstering his directorial experience in the gaming industry.
The rumblings of a Boyd/Penn amalgamation began when Donerail Group, a Penn investor, scrutinized Penn’s betting strategies in a pointed letter to the board in late May. The investor criticized the loss of billions of dollars on fruitless online sports betting ventures while advocating for a possible sale.
Donerail suggested that despite blunders in sports betting dousing Penn shares, the company yet possesses a goldmine of regional casino assets. These assets could potentially yield at least twice its market capitalization if sold. There’s speculation that Boyd would be an ideal buyer, despite skepticism from sell-side analysts about such an acquisition ever materializing.
Renowned Gordon Haskett analyst Don Bilson chimed in the whispers, suggesting that Boyd’s interest might be either in all or parts of Penn. Still, both companies have remained tight-lipped about the matter. The conjecture is that Penn might have enticing offerings for Boyd, particularly in the Midwest and the South, despite a significant overlap between the two operators’ territories.
Boyd, which operates its mobile application and retail sportsbooks in Nevada and holds a 5% stake in FanDuel, has an interesting connection with Penn that could possibly pave the path for an acquisition. Felicia Hendrix, CFO of Penn, and Hartmeier share an overlapping history at Barclays and Lehman Brothers, which could potentially serve as an advantage in brewing takeover discussions.
Boyd’s market capitalization currently outweighs Penn’s with $4.97 billion against $2.58 billion, indicating that Boyd might just have the financial munitions to make a move on Penn. But considering the premium likely to be demanded by the target, Boyd may have to issue debt or equity if it decides to make an offer for the entirety of Penn. The gaming industry and the market waits with bated breath to watch this potential merger unfold.
