As the summer continues, so do the rumors of Penn Entertainment being sold. And one potential buyer that keeps coming up in conversations is Boyd Gaming.
Boyd’s leaders were mum on the subject during the company’s latest earnings call. Despite that, rumors persist. And not everyone is on board.
Gaming & Leisure Properties CEO Peter Carlino has voiced his displeasure at the notion of a Penn sale. But does Carlino’s company, or any other real estate investment trust (REIT), have the power to block a potential sale?
Boyd did not deny Penn sale rumors during latest earnings call
As of now, lawmakers have not legalized Missouri online casinos, though online casino play is possible in the Show Me State through sweepstakes and social casinos.
Boyd currently owns two retail casinos in Missouri, and Penn owns three. If Boyd did buy Penn, Missouri gaming regulators would almost certainly demand Boyd sell some of the properties, as it would own five of the state’s 13 riverboat casinos.
Boyd President and CEO Keith Smith has not commented on whether his company intends to purchase Penn. But during the earnings call, he said Boyd will continue to pursue mergers and acquisitions (M&A).
“If you look at the history of our company … the majority of our growth obviously has come through M&A (mergers and acquisitions). And I think we’ve developed a great expertise at it. We know how to buy properties right, companies right, we know how to extract value out of these companies once they’re part of our portfolio. We’ve always been willing, it’s not new news, to take a hard look at opportunities that arise. And so, we’ll continue to do that.”
Boyd Executive Vice President and CFO Josh Hirsberg noted that in any deal, the company takes a strategic approach.
“It’s not really about the financing markets that drives our ability to execute a transaction. … It’s acquiring assets that have a strategic rationale – an acquisition that generates free cash flow and the valuation makes sense for us.
“Just as we’ve done historically, we’ve tried to be very disciplined in how we think about acquisitions and how we execute on them.”
That “strategic approach” could include partnering with another gaming company to purchase Penn. For instance, Flutter Entertainment, which owns FanDuel, has been rumored to possibly partner with Boyd on the deal.
That could make sense given Flutter’s expertise in the sports betting space, as Penn also operates a sportsbook.
REITs may not have a say in a Penn sale
Carlino is the former CEO of Penn National Gaming. His father founded the company.
“I would look with a jaundiced eye towards anything that could upset the apple cart of what we have here. … We like our cross-collateralized leases, and we would be very reluctant to see anything change.”
As a REIT of Penn, Gaming & Leasure Properties could oppose the sale. But could it or any other REIT stop it?
Earnings + More thinks so. It noted that Gaming & Leasure Properties (GLP) has “conditional blocking powers” should a merger or acquisition take place. One source told Earnings:
“Specifically, in its master lease with Penn, GLP has change-of-control provisions which set various conditions for an acquirer and could require GLP’s approval for any divestitures/lease modifications.”
However, Earnings did say that GLP, or any REIT for that matter, wouldn’t necessarily be able to withhold consent if the group buying Penn “meets certain predetermined thresholds.”
One source told Earnings that “someone like Boyd” would be pre-qualified based on its size and experience in the gaming industry.
And it’s worth noting that if monopoly concerns arose, it would be Boyd that could offload its own assets, rather than doing so with its acquired Penn assets. That means REITs wouldn’t need to sign off on a deal.
