By Milana Vinn and Anirban Sen
NEW YORK, June 20 (Reuters) – U.S. casino operator Boyd Gaming has approached Penn Entertainment to express interest in acquiring its peer, valued at more than $9 billion, including debt, according to people familiar with the matter.
The potential combination would be the biggest merger among U.S. gambling companies since Eldorado Resorts’ $17.3 billion acquisition of Caesars Entertainment in 2020.
It would be challenging since Boyd, the smaller company with a market value including debt of $7.8 billion, would need financial firepower to clinch a deal. The companies would also need the blessing of regulators and officials in several states where they both operate.
Boyd would also need to win over Walt Disney, which through its sports network ESPN has a partnership with Penn.
The sources said there was no certainty Penn will engage in negotiations with Boyd. They asked not to be identified because the matter is confidential.
Penn declined to comment. Boyd and Disney did not immediately respond to requests for comment.
Penn operates 43 casinos and racetracks across 20 U.S. states, according to its website. It also offers online sports betting and online casino gambling in several locations.
Last year, Penn struck a $1.5 billion licensing deal with Disney that allowed the casino operator to use ESPN’s brand in its online sportsbook. As part of the deal, Penn’s rights to the ESPN Bet brand will initially run for 10 years, while ESPN has been granted rights worth about $500 million to purchase Penn stock.
The early success of the ESPN deal has bolstered Penn CEO Jay Snowden after a soured acquisition. Penn spent $550 million to acquire Barstool Sports only to sell it back to its founder Dave Portnoy for $1 last year.
Penn also acquired Canada’s Score Media and Gaming for $2.1 billion in 2021.
Some activist investors, including Donerail Group, have criticized Penn for spending billions on dollars on its digital business without prospects for strong returns, and have called on the Wyomissing, Pennsylvania-based company to explore a sale.
Last week, Truist Securities analysts wrote in a research note that it was unlikely Penn’s management would abandon its operational plan to explore a sale.
“Despite the activist letter, we don´t think any sort of formal strategic review at Penn is likely in the near-term with a clear ESPN Bet product roadmap; football season on the horizon; and higher/volatile interest rates still impacting overall M&A for now,” the Truist analysts wrote.
Based in Las Vegas, Boyd has 28 gaming entertainment properties in 10 U.S. states, manages a tribal casino in northern California, and operates an online casino gaming business. It also has a 5% stake in sports-betting operator FanDuel Group.
A combination between Boyd and Penn would need the sign-off from several constituents other than Disney, including gaming regulators in the several states and landlords such as Gaming & Leisure Properties.
Boyd’s casino operations overlap with Penn in some states, so Boyd would also likely be forced to divest some operations in those locations, the sources said. (Reporting by Milana Vinn and Anirban Sen in New York; Editing by David Gregorio)