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- These three regional casino operators could loom large in industry consolidation
- There’s chatter of increased activity across the casino industry
- Monarch Casino expected to remain selective
There are inklings that asset sales in the gaming industry will soon perk up, and some familiar casino operators could figure prominently in that scenario.
Boyd Gaming’s Fremont Hotel & Casino in downtown Las Vegas. The operator could be a player in casino mergers and acquisitions. (Image: Shutterstock)In a new report to clients, Jefferies analyst David Katz highlights regional casino operators Boyd Gaming (NYSE: BYD), Churchill Downs (NASDAQ: CHND), and Monarch Casino & Resort (NASDAQ: MCRI) as among the most likely gaming companies to potentially make headlines when it comes to near to medium-term asset trading.
Based on our industry checks, we believe CHDN is likely a seller of its regional gaming assets, while MCRI and BYD have stated they are inclined to be active buyers,” wrote Katz. “Assuming productive terms, we would view deal activity among any of these companies as positive for their respective stocks.”
Kentucky-based Churchill Downs is expanding its iconic racetrack in its home state and bolstering historical racing machine (HRM) venues, among other pursuits. The company has previously been acquisitive, but it does control some assets that could be attractive to suitors, though Katz didn’t identify specific properties the operator could look to unload.
Monarch M&A Rumors Persist
There is real-time evidence that regional casinos are on the block. Earlier this month, MGM Resorts International (NYSE: MGM) announced the sale of the operating rights of the MGM Northfield Park racino near Cleveland to private equity funds controlled by Clairvest Group for $546 million in cash.
Additionally, there’s talk among analysts that Caesars Entertainment (NASDAQ: CZR) is working with landlord VICI Properties (NYSE: VICI) on some form of resolution to its regional master lease. It’s possible that deal could result in the operator divesting a regional property or two in an effort to raise cash to reduce debt while mitigating its long-term obligations to VICI, though it’s not clear that Caesars is looking to sell regional venues.
Amid all the scuttlebutt, Monarch Casino is expected to figure into the consolidation equation, largely because it currently owns just two gaming venues — one in Black Hawk, Colo., and another in Reno. Still, the company’s role in mergers and acquisitions activity is long-rumored and has produced nothing in the way of results, confirming management’s high level of selectivity.
Should Monarch not identify suitable acquisition targets, it can retain capital and direct it toward shareholder rewards, including quarterly and special dividends and share repurchases.
Boyd Has M&A Ammunition
After hauling in $1.4 billion in post-tax proceeds from the sale of its 5% stake in FanDuel, Boyd Gaming has significantly reduced leverage while sporting what some analysts describe as one of the best balance sheets in the industry. Translation: the operator has the tools with which to be a player in casino consolidation.
Some members of the sell-side community say Boyd’s mergers and acquisitions priorities haven’t changed following the FanDuel transaction, potentially signaling the operator is keeping an open mind while employing a pragmatic approach.
Last year, rumors surfaced that Boyd could make a run at rival Penn Entertainment (NASDAQ: PENN) in what would have been a massive transaction by industry standards, but Wall Street largely scoffed at that notion, noting that Penn isn’t a willing seller. That rumor subsequently perished nearly as fast as it appeared.
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