When rumors of consolidation surface, executives typically refrain from commenting. This was the case with Penn CEO Jay Snowden when asked by JPMorgan analyst Joseph Greff during an earnings call. Snowden, however, added that rumors aren’t always accurate.

Speculation about a potential takeover of Penn began in late May when investor Donerail Group sent a letter to Penn’s board of directors, urging the gaming company to consider selling itself to boost shareholder value. The rumors intensified several weeks later, with reports suggesting that Boyd Gaming (NYSE: BYD) was contemplating a $9 billion bid for Penn.

ESPN Bet Improvements Reduce Penn’s Incentive to Sell

Since the rumors surfaced, analysts have debated the likelihood of Boyd Gaming as a buyer, especially if Penn’s interactive unit, including ESPN Bet, is part of the deal. Many believe a third party might be necessary to purchase the digital business separately.

Stifel analyst Steven Wieczynski noted, “Management cited improved risk & trading and parlay mix driving NGR growth (likely at high-flow through), with better-than-expected losses also benefiting from further sequential improvement in promo reinvestment.”

Penn reported a 138% year-over-year increase in monthly active users for ESPN Bet, crediting enhanced efficiencies, risk management, and parlay offerings for the improved structural hold.

Challenges in Penn Casino Sales

Penn operates 43 gaming venues across 20 states, giving it a wide range of assets to potentially sell. However, Snowden pointed out that such sales are not straightforward.

The majority of Penn’s casino properties are on land owned by Gaming and Leisure Properties (NASDAQ: GLPI). Any sale of an individual casino’s operating rights would require approval from GLPI, as the buyer would need to enter into a new lease agreement with the landlord.

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