Penn Entertainment (NASDAQ: PENN) said it deal-making isn’t high atop its list of priorities with CEO Jay Snowden outlining several other options that rank higher than acquisitions.
The regional casino operator reported third-quarter results earlier today and on its conference call with analysts, Snowden noted that Penn’s capital allocation priorities are deleveraging, examining increased stock repurchase activity and tending to four recently completed growth projects as well as the Hollywood Casino Hotel Council Bluffs in Iowa (2028) and Boomtown New Orleans (2029) rank ahead of acquisitions on the company’s to-do list.
“Think about the hurdle you have to cross. If you’re going to do something from a mergers and acquisitions (M&A) perspective, it’s going to have to be a very high implied free cash flow return and carry very little risk,” said Snowden on the call. “And as I’ve said before, it needs to have strategic value for us. Is it a new market? Is it a large database? Those would be the factors that we would be considering.”
The Penn chief executive added that deleveraging is the top priority and that the gaming company could look closely at share repurchases next year.
Maybe a Return to Las Vegas in the Future
Snowden’s comments about Penn not rushing to make acquisitions arrive as some competitors are looking to unload assets, some of which could be in Penn’s wheelhouse. He did, however, express a willingness to examine returning to Las Vegas in the future.
“We have the broadest footprint. We operate in more states than anyone in the country, anyone in the sector,” Snowden said on the call. “And plugging that into a Las Vegas quality asset at a great location would provide a lot of value. But we’re not going to do that for anyone else unless there’s a lot of value opportunity — realization opportunity — for Penn Entertainment. So it’ll happen at some point, I believe.”
As for what’s for sale in Las Vegas, that remains to be seen, but there’s widespread speculation that when Golden Nugget owner Fertitta Entertainment Inc. (FEI) closes its $17.6 billion acquisition of Caesars Entertainment (NASDAQ: CZR), that combined company could sell a Las Vegas casino hotel.
Penn left Las Vegas in September 2022 when Bally’s closed on its acquisition of the operating rights to the now shuttered Tropicana.
Snowden Bullish on Texas
Following Tuesday’s midterm election results, there’s increased optimism that Texas could revisit and ultimately approve gaming expansion, including sports wagering. Penn owns two of three Class I thoroughbred racetracks in the Lone Star State, potentially positioning it to capitalize on new opportunities in the state.
“So we actually have been operating in the gaming space through horse racing in Texas for a long time,” said Snowden on the conference call. “We’ve got two great assets there and we’re ready to play offense. It’s not a defensive play for us. We also, I think, are positioned well in that we have great relationships with the movers and shakers in Texas.”
Rephrased by The Mystic Gambler