Truist: Churchill Downs Regional Assets Eye Buyers, Boyd and Monarch Tipped as Suitors

Churchill Downs (NASDAQ: CHDN) is exploring the sale of nine regional casinos, and equity analysts at Truist Securities say several prospective suitors could emerge as the process advances.

The operator of the iconic Kentucky racetrack revealed its intention to divest the nine gaming venues when delivering second-quarter financial results on July 29. Ahead of the company’s third-quarter update on Wednesday, Oct. 28, Truist Securities analyst Barry Jonas noted that while buyer interest remains active, a finalized transaction is unlikely until later this year.

Jonas did not name specific private equity firms or tribal entities that might bid on the portfolio. Neither Boyd nor Monarch has publicly declared an interest in any of the properties.

Why Boyd and Monarch Are Logical Bidders

While Las Vegas-based Boyd and Reno-based Monarch have not formally entered the process, both operators represent logical suitors for select properties.

The reasons extend beyond the fact that both Boyd and Monarch are frequently attached to casino industry mergers and acquisitions speculation. Both have the financial firepower for bolt-on deals and in the case of Monarch, it currently owns just two casino hotels, which in the eyes of Wall Street, makes it a candidate to add to the size of its portfolio.

There are other reasons why either or both companies could kick the tires on Churchill assets. First, there’s little geographic overlap between Boyd and the seller’s venues that are on the market and no such overlap with Monarch.

Second, Churchill Downs owns the real estate on which all nine regional casinos reside. That’s material because it’s widely believed that neither Boyd nor Monarch are interested in acquiring gaming venues without owned real estate.

Flexible Sale Structure Broadens Appeal

Churchill Downs wants to sell the following nine gaming venues: Calder Casino in Florida, Terre Haute Casino in Indiana, Hard Rock Casino in Iowa, Oxford Casino in Maine, Ocean Downs in Maryland, Harlow’s and Riverwalk Casinos in Mississippi, del Lago in New York and Presque Isle in Pennsylvania.

The seller has made clear it expects to unload those venues individually or in small groups, implying that multiple buyers could emerge. That could be attractive to various buyers, potentially including Boyd and Monarch, because buying one or two venues is obviously more economical than acquiring nine.

“A decent transaction multiple should bode well for valuations across the peer group,” adds Jonas.

While any prospective deal remains speculative, Monarch’s historical preference for tax-friendly states suggests it may pass on higher-tax jurisdictions like Pennsylvania or New York while evaluating opportunities in more tax-accommodative markets.