Flutter Entertainment and Boyd Gaming are reportedly considering a joint takeover of Penn Entertainment. [Image: Shutterstock.com]

A potential alliance

Gambling giant Flutter Entertainment is reportedly considering a takeover of Penn Entertainment, the company that runs ESPN Bet. Its focus is on digital assets, rather than Penn’s extensive portfolio of land-based casinos and racetracks across North America.

Regional gambling operator Boyd Gaming is eyeing up a potential acquisition opportunity for those physical assets and could team up with Flutter to get a deal over the line.

Boyd’s potential interest in submitting an offer worth at least $9bn

Reports first surfaced last month about Boyd’s potential interest in submitting an offer worth at least $9bn. Insiders close to the situation said that Penn’s management had doubts about Boyd’s ability to finance such a significant bid by itself.

Penn Entertainment shares jumped nearly 5% after rumors of a possible acquisition started circulating on Friday.

Taking out the competition

Flutter Entertainment owns and operates FanDuel, which dominates the US sports betting market alongside DraftKings. The entry of ESPN Bet in November in 17 states was cause for concern due to fears the Penn Entertainment-operated sportsbook might take a lot of business away from FanDuel.

Other digital assets under the Penn Entertainment portfolio include the Hollywood Casino iGaming platform that is live in four states and theScoreBet that operates in Ontario, Canada.

The results to date haven’t been overly impressive, with ESPN Bet carving out only about 6% of the market. It is still not live in the country’s biggest sports betting market, planning to launch in New York at some point in 2024 after securing a license for $25m following the exit of WynnBET.

Some hurdles to navigate

Any deal won’t be straightforward due to potential regulatory concerns in various states. This is especially true in the states where Boyd and Penn both run land-based gambling facilities.

Boyd Gaming already has a relationship with Flutter, owning 5% of FanDuel. It has also partnered with FanDuel to run sportsbooks in numerous states.

The Federal Trade Commission would also have to rubber-stamp the deal to ensure that a transaction doesn’t jeopardize competition in the sector. The sale of certain properties might be a consequence to ease these concerns.

Appetite exists among certain Penn investors over a potential sale of the company after a few years of struggles. Investor activists Donerail Group issued a public letter in May criticizing the company’s management and saying that a sale could help salvage shareholder value after the stock price dropped by more than 80% over the past three years.