Boyd Gaming's Board Appointment Fuels Speculation of Penn Takeover
Shares of Penn National Gaming (NASDAQ: PENN) surged on Tuesday following an announcement by Boyd Gaming (NYSE: BYD) of a new board appointment, fueling speculation that Boyd may be considering an acquisition of the rival regional casino operator.
Late Monday, Boyd Gaming (NYSE: BYD) announced the appointment of Michael Hartmeier to its board of directors. Hartmeier brings extensive experience from his previous roles as group head of lodging, gaming, and leisure investment banking at Barclays, and similar positions at Lehman Brothers and Credit Suisse First Boston.
Throughout his 25-year career in investment banking, Hartmeier has managed over $125 billion in financing and advisory transactions, including significant work within the gaming sector, as noted in Boyd’s statement based in Las Vegas.
Hartmeier also holds prior experience as a board member at Full House Resorts (NASDAQ: FLL), another regional casino operator, highlighting his deep familiarity with the gaming industry.
Birth of Boyd/Penn Rumor
In late May, the Donerail Group, a Penn National Gaming (NASDAQ: PENN) investor, criticized the company in a strongly-worded letter to the board, accusing it of squandering billions on online sports betting ventures with little to show for it. The group urged Penn to consider a sale, highlighting the value of its extensive portfolio of regional casino assets, which they believe could command double the company’s current market capitalization in an acquisition.
Despite skepticism from some analysts about the likelihood of Penn being acquired, Boyd Gaming (NYSE: BYD) has emerged as a speculated potential buyer. Gordon Haskett analyst Don Bilson suggested that Boyd may be evaluating various options, including acquiring all or parts of Penn. However, neither company has officially commented on these rumors.
Boyd Gaming operates its own mobile app and retail sportsbooks in Nevada, and holds a 5% stake in FanDuel, with partnerships extending to other states. This suggests that while Boyd may have interest in Penn, any potential deal might exclude ESPN Bet, indicating selective interest focused on regional casino assets, particularly in overlapping markets like the Midwest and South.
Boyd/Penn Connections
Casino investors’ push to limit or ban smoking at properties they invest in reflects a blend of altruistic and capitalist motivations. According to the Surgeon General, there is no credible way to mitigate the harmful effects of secondhand smoke.
In casinos that allow smoking, frontline employees such as bartenders, cocktail waitresses, and dealers are particularly vulnerable to these risks. This vulnerability increases the likelihood of health-related absences among staff, potentially exposing operators to litigation.
Cost is another significant factor. Last year, the average cost of employer-sponsored healthcare plans approached $15,800 per employee, according to Mercer. For large employers like gaming companies, this figure slightly dropped to $15,640 per insured worker, but when aggregated across all insured gaming employees, it represents a substantial expense.
Moreover, smoking-related expenses cost US employers nearly $200 billion annually by some estimates. Some corporations enforce policies prohibiting smoking on company premises, and certain sectors, including parts of the gaming industry, may even withhold health insurance from employees who smoke. These issues are pivotal for investors advocating smoke-free policies among casino operators.
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