Shares of Penn Leisure (NASDAQ: PENN) surged final Friday after investor the Donerail Group despatched a letter to the gaming firm’s board urging it to think about a sale, however analysts don’t imagine such a transaction will materialize.
A slide from a Penn Leisure investor presentation. Analysts don’t imagine a purchaser will come calling anytime quickly. (Picture: Penn Leisure)
Within the letter to Penn Chairman David Handler Donerail Managing Accomplice Will Wyatt excoriated the regional on line casino operator for expensive missteps within the on-line sports activities betting house and overpaying CEO Jay Snowden whereas noting the corporate ought to take into account a sale as a result of it might command double its present market worth in such a deal owing to its regional gaming belongings. JPMorgan analyst Joseph Greff isn’t a believer in Penn promoting itself anytime quickly.
We predict a purchaser for PENN is extremely tough and don’t see agitation leading to something that sustains shareholder-value creation,” wrote the analyst.
Greff famous he understood from the place Donerail is coming because of Penn’s prolonged stretch of share declines, however he added “significant interactive losses producing poor investor sentiment for the general enterprise.”
Some Speak of Penn Suitors Emerges
Whereas Greff and different sell-side analysts aren’t satisfied a purchaser will quickly come calling for Penn, reviews out Monday counsel in any other case.
CNBC’s David Faber reported that he’s heard there’s curiosity in Penn, however he didn’t determine sources or particular suitors. He did, nonetheless, query whether or not or not Boyd Gaming (NYSE: BYD) or different gaming firms might make a run at Penn, which is broadly considered as a deep-value title.
It’s simple to drift Boyd as a possible suitor for Penn just because the previous, just like the latter, is a regional on line casino operator. Moreover, Boyd has one thing Penn lacks: a big Las Vegas footprint. Conversely, there’s important overlap between the 2 operators within the Midwest and the South, indicating Boyd doesn’t must rush to make a cope with Penn.
Add to that, Boyd owns 5% of FanDuel, which means Penn’s struggling ESPN Guess enterprise wouldn’t be a promoting level in a doable deal. Las Vegas-based Boyd hasn’t signaled any plans for large-scale acquisitions over the close to time period, and people are probably among the many the reason why shares of Penn slipped virtually 1% on Monday.
With Penn, One thing’s Bought to Give
Along with highlighting the advantages of a possible sale, the Donerail letter to Penn addresses an vital, long-running concern of Penn shareholders: the corporate’s expensive, quite a few errors within the on-line sports activities betting trade.
As different market members earlier than it have achieved, Donerail argued that Penn’s ventures in on-line gaming aren’t paying off and are overshadowing the operator’s compelling portfolio of regional casinos. Jefferies analyst David Katz seems to agree with the notion that Penn buyers are tiring of the corporate’s interactive missteps.
“Regardless of the result of the present course of, revisiting the present path of funding and returns is warranted, given the present aggressive panorama in digital and the uncertainties across the funding required to seize the acknowledged share objectives,” he wrote in a report. “One thing has to alter” in view of shareholders’ restricted tolerance for the prices of interactive enlargement.”
