Boyd's Appointment Sparks Speculation on Penn's Takeover
Penn Entertainment's (NASDAQ: PENN) stock soared on Tuesday, following rumors that their rival, Boyd Gaming (NYSE: BYD), might be considering an acquisition of the company.
On Monday, Boyd revealed that Michael Hartmeier, a former group head of lodging, gaming, and leisure investment banking at Barclays, had joined their board of directors. Before joining Barclays, Hartmeier had worked in similar roles at Lehman Brothers and Credit Suisse First Boston. During his 25-year career in investment banking, he supervised over $125 billion in financing and advisory assignments, including initiatives for several gaming organizations.
Hartmeier is also an experienced gaming industry director as he sat on the board of Full House Resorts (NASDAQ: FLL), another casino operator mainly focusing on the regional market.
Possible Beginning of the Boyd/Penn Rumor
In late May, Donerail Group, a shareholder in Penn, sent a heated missive to the board, arguing that the company had squandered billions on online sports betting to no avail and urging it to consider selling. Donerail believes that while Penn has mismanaged its sports betting investment, the operator's regional casino assets could be worth at least twice as much as the company's current market valuation in a possible takeover. Though some market analysts are skeptical about a potential acquisition of Penn, it has been postulated that Boyd could be a possible buyer.
In his report to clients, Gordon Haskett's analyst Don Bilson speculated that Boyd could be examining either all or parts of Penn. Neither company has issued an official comment on this matter. It's likely that some parts of Penn may appeal to Boyd, particularly in the Midwest and the South, as there are existing regional overlaps between the two operators.
However, in sports wagering, Boyd operates their own mobile app and retail sportsbooks in Nevada and owns a 5% stake in FanDuel, a collaboration with the company in other locations. This could imply that even Boyd might not be interested in ESPN Bet, a potential target company.
Potential Connection Between Boyd and Penn
There's an interesting connection regarding Boyd possibly courting Penn. Penn's CFO, Felicia Hendrix, spent 12.5 years at Barclays, and her term overlapped with Hartmeier's. Prior to spending that stretch at Barclays, Hendrix had worked at Lehman Brothers for 10.5 years, and her time there also partially coincided with Hartmeier's work at the investment bank.
This link could be nothing more than a curious fact or pivotal in potential takeover negotiations, should they commence.
With regard to financial strength, Boyd's current market cap stands at $4.97 billion. In comparison to Penn's $2.58 billion market cap, Boyd might possess enough resources to make a move on Penn. Nevertheless, Boyd could need to issue debt or equity if they opt to make a proposal for Penn in its entirety.
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