Boyd Board Appointment Stokes Penn Takeover Chatter

Posted on: June 11, 2024, 03:07h. 

Last updated on: June 12, 2024, 10:34h.

Shares of Penn Entertainment (NASDAQ: PENN) traded higher Tuesday after rival Boyd Gaming (NYSE: BYD) announced a board appointment that stoked speculation it could be mulling an acquisition of the rival regional casino operator.

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Boyd Gaming’s Orleans Hotel & Casino. The company’s newest board appointment is stirring speculation about a takeover of rival Penn Entertainment. (Image: YouTube)

Late Monday, Boyd said it added Michael Hartmeier to its board of directors. Hartmeier previously served as the former group head of lodging, gaming, and leisure investment banking for Barclays. Before that, he served in similar capacities at Lehman Brothers and Credit Suisse First Boston.

During his 25-year career in investment banking, Hartmeier completed more than $125 billion in financing and advisory assignments, including work for numerous gaming companies,” according to a statement issued by Las Vegas-based Boyd.

Hartmeier has gaming industry director experience as he was previously a member of the board at Full House Resorts (NASDAQ: FLL), also a regional casino operator.

Birth of Boyd/Penn Rumor

In late May, Penn investor the Donerail Group authored a scathing letter to the board, saying the company has frittered away billions of dollars on online sports betting with nothing to show for it while encouraging the operator to mull a sale.

Donerail believes that while sports betting missteps have plagued Penn shares, the company still controls a treasure trove of regional casino assets that could fetch at least double the operator’s market capitalization in an acquisition. While some sell-side analysts doubt Penn will be acquired, Boyd has been floated as a logical suitor for the company.

In a note to clients on Tuesday, Gordon Haskett analyst Don Bilson said Boyd could be evaluating all or parts of Penn. Neither company has commented to that effect. It’s possible that Penn has some pieces that could be attractive to Boyd, but on a regional basis, namely in the Midwest and the South, where there is significant overlap between the two operators.

In sports wagering, Boyd runs its own mobile application and retail sportsbooks in Nevada, and controls 5% of FanDuel, partnering with that company in other states. That could be a sign that even if Boyd wants to move on Penn, the potential suitor might not be interested in ESPN Bet.

Boyd/Penn Connections

Regarding Boyd potentially courting Penn, there is an interesting connection. Penn CFO Felicia Hendrix was a managing director at Barclays for 12.5 years and her time there overlapped with that of Hartmeier. Before that, she spent 10.5 years at Lehman Brothers and some of her time there intersected with Hartmeier’s tenure at the investment bank.

That may be no more than an interesting footnote or it could prove to be a relationship that could be useful in takeover talks, should those discussions emerge.

As for financial heft, Boyd has a market capitalization of $4.97 billion at this writing compared to $2.58 billion for Penn, indicating the former could possess the firepower needed to make a move on the latter. Still, when factoring a premium for a target, Boyd might need to issue debt or equity should it decide to make an offer for Penn in its entirety.