Boyd Gaming CEO: We have “great expertise” in M&A transactions

Boyd Gaming CEO Keith Smith has claimed the company has “great expertise” in M&A as rumors continue to swirl over a potential swoop for PENN Entertainment.

A Reuters report in June suggested Boyd Gaming was eyeing up a play for the firm behind ESPN Bet and Hollywood Casino, which triggered a 10% jump in PENN’s stock.

Further reporting from The Deal earlier this month suggested Boyd Gaming could team up with Flutter Entertainment in a two-pronged approach for the business.

The Deal suggested that the digital arm of the Wyomissing-based business would be taken over by the FanDuel parent company, with the land-based operations absorbed by Boyd Gaming.

A recent report by JMP Securities suggested ESPN Bet’s online market share of handle for the second quarter was just 3.2%, down from 4.7% in Q1, as PENN management faces mounting pressure to deliver digital gains. PENN axed Barstool Sportsbook in 2023 and signed a $1.5bn deal over 10 years with Disney to use the ESPN brand.

Speaking on an analyst call following the release of Boyd Gaming’s H1 results, Smith was bullish on the company’s ability to sanction, and then integrate, businesses via M&A.

However, he did not specifically mention PENN, or any other company, in his comments after being repeatedly pushed by analysts on the topic.

Smith said: “If you look back over the history of our company, the majority of our growth has come through M&A. I think we have developed a great expertise at it. We know how to buy companies. We know how to extract value out of these companies once they are 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. In terms of how we may finance a particular transaction, it’s wholly dependent on the specific facts and circumstances.”

Boyd Gaming bosses were also pressed on specific M&A plans for the group’s online division, after Q2 revenue for the segment rose more than 50%.

Revenue for the online arm came in at $129.9m, up from $85m in Q2 2023, while its adjusted EBITDAR amounted to $17.1m, compared with $13.4m the year prior.

However, Smith said that there didn’t appear to be any M&A opportunities on the horizon that would fundamentally alter the makeup of Boyd’s online operations.

Smith said: “We’re very pleased with where Boyd Interactive is in terms of its growth and where it is in our expectations. operating well in Pennsylvania and New Jersey.

“I don’t see any material M&A on the horizon to all of a sudden have that grow in any significant fashion.

“When we started that business a couple of years ago, we talked about having a regional strategy, not a national strategy, but that allowed us to speak to the customers in the states where we do business, and in some of the surrounding states where we draw large portions of our customers.

“That remains our strategy and we’re pretty pleased with how its rolling out at this point, and don’t really see a need to do anything significant to move it along.”

Josh Hirsberg, Boyd Gaming CFO, followed up on Smith’s comments by putting distance between the operator and other online competitors over spending plans.

In comparison to other land-based legacy operators, Boyd has taken a far more conservative approach to online sports betting and has been able to leverage its 5% stake in FanDuel to good effect.

Hirsberg said: “We’re not in the business of making big investments and losing a lot of money to get market share. That’s just not our philosophy. Others may have a different strategy; that’s just not our strategy.”

On a group-wide basis, Q2 revenue was reported at $967.5m while adjusted EBITDA came in at $316.3m, up from $917m and $324.3m, respectively.

Boyd Gaming’s share price was up just over 1% at the time of writing to $58.53.