Earlier this month, a group of PENN Entertainment investors became unhappy with the company’s direction. As a result, they began advocating for a sale.
PENN owns three of Missouri’s 13 brick-and-mortar casinos. If lawmakers ever legalized Missouri online casinos, PENN would be among the frontrunners for a license.
According to a Reuters report, Boyd Gaming was the first to approach the company with an offer. However, a recent Earnings + More newsletter says some analysts believe a deal is unlikely.
Wells Fargo and Deutsche Bank say deal is too complicated
The two companies own nearly half of the Missouri retail casinos, with five properties under their control. In the event of a sale, the new company would draw ire from regulators over monopoly concerns.
If a sale were to happen, the Missouri Gaming Commission would likely force Boyd to sell a casino or two. Regulators in several jurisdictions forced similar actions when Caesars Entertainment merged with Eldorado Resorts.
As a result, Wells Fargo and Deutsche Bank analysts noted a deal would be extremely complex. Furthermore, negotiations could take a significant amount of time before becoming official.
Concerns aren’t limited to Missouri
Additionally, there are difficulties on the national scale. A merger of this scale would require approvals from multiple states and possibly the sale of other casinos.
Then, there is also the sheer size of a deal like this. It would be the largest merger of gaming companies in the United States since the Caesars-Eldorado deal in 2020. In other words, a lot of assets would swap hands.
All of these concerns lead the banks’ analysts to lean bearish on a deal being completed.
What would happen to ESPN BET?
The recent shift to ESPN BET also throws a wrench in the gears of a possible sale.
Some investors, such as the Donerail Group, are extremely displeased with the company’s operation and want to sell. The investor group released an open letter in May stating that shares are down over 80% in the last three years because of this.
On the opposite side, other investors feel the partnership with the ESPN brand could propel the company to success so selling low now might be shortsighted.
With investors at odds and so many significant hurdles to overcome, it is easy to see why banking analysts have little faith in a deal being struck.
