Shares of PENN Entertainment (NASDAQ:PENN) traded higher on Thursday with a report linking the company to an acquisition that could change the casino sector.
What Happened: Penn Entertainment has been approached by Boyd Gaming (NYSE:BYD) according to a new report from Reuters. The report comes as Penn shares are down 23% year-to-date in 2024 and the company has struggled to grow with its new ESPN Bet online sports betting platform.
The deal could face challenges getting off the ground, with Body having a smaller valuation when factoring in debt than Penn. A merger or acquisition of Penn could mark the largest in the gambling space in the United States since the $17.3 billion 2020 deal that merged Caesars Entertainment (NASDAQ:CZR) and Eldorado Resorts.
Another key to the deal would be Boyd winning over The Walt Disney Company (NYSE:DIS), since Penn has a licensing agreement for the ESPN Bet brand for its sportsbook from the media company. Penn has a 10-year deal with Disney for the ESPN brand.
Penn has 43 casinos and racetracks in 20 states, along with the online sports betting and online casino businesses.
Boyd has 28 properties in 10 states and also has a 5% stake in FanDuel, which is a unit of Flutter Entertainment (NYSE:FLUT). Body has an online casino gaming business, but is not a large player in the online sports betting market.
Related Link: Sports Betting Sector Could See Duopoly Or Oligopoly In Most States: Goldman Sachs Analyst Favors These 2 Stocks
Why It's Important: Penn saw early success with the launch of ESPN Bet, but the sports betting brand has failed to gain market share in many states alongside market leaders DraftKings Inc (NASDAQ:DKNG) and FanDuel.
Penn has also been criticized for its $550 million spent to acquire Barstool Sports before selling the company back to its founder Dave Portnoy for $1 years later.
The losses from the company's online business have worried some investors, as the casino business has shown strong results in recent years.
Recently, analysts have become more favorable towards Penn as the company strategically focuses on long-term profitability for its online betting platform and reports strong casino traffic.
The latest news indicates the early stages of a potential deal, but there is no certainty that Penn will enter talks or is considering selling its business.
PENN, BYD Price Action: Penn shares were up 10% to $20.04 on Thursday, versus a 52-week trading range of $13.50 to $29.38.
Boyd shares fell 2% to $52.74 on Thursday on news of the report.