As state after U.S. state makes legalizes sports betting a reality in light of the recent U.S. Supreme Court ruling over turning the Professional and Amateur Sports Protection Act, regional casino operator Boyd Gaming is stuffing its war chest in anticipation of a massive acquisitions binge.
The Paradise, Nevada based casino operator, which currently operates some 24 casino properties, has dramatically upped its debt offering, jumping from $500 million to $700 million, in the run up to what analysts expect and the company has acknowledged will be a major shopping spree.
Boyd has been known to go on acquisitions rants before. In December last year Boyd inked a deal with Penn National Gaming to pick up four properties as soon as Penn closes its acquisition of Pinnacle Entertainment. A few days after finalizing the deal, Boyd picked up the Valley Forge Casino Resort in King of Prussia, Pennsylvania. Some six months later, Boyd acquired Lattner Entertainment, picking up 220 locations from the Illinois bar and tavern gaming operator.
Capitalizing on experience
With one of the largest sportsbooks in Nevada, Boyd has long been well established in the sports betting market and is now positioning itself to capitalize on its decades of market experience and existing network of regional casinos to take advantage of legalized sports betting across the U.S.
Ramping up its debt to bulk out its war chest, Boyd is actively positioning itself to step into as many new markets as possible as state legislatures move to make the results of the Supreme Court decision in Christi vs NCAA into state law, effectively legalizing sports betting and tapping into the tax revenues that come with it.
Boyd CEO Keith Smith has gone on record saying that the company is fully prepared to take advantage of sports betting as it spreads across the nation.
An enormous market with low margins
With estimates of the size of the legalized sports betting market in America set at anywhere from $60 to $70 billion per year, individual casino operators will need to be well prepared to secure their position in the market if they are to take a leading position what is likely to be sea of rapidly proliferating competition.
While the size of the market is enormous, sportsbooks are traditionally a low margin business, with profits from Nevada sportsbooks coming in at just 2% of the $248 million wagered in the state last year. Experts from the American Gaming Association have put the illegal sports betting market in the U.S. at $150 billion yearly, underscoring the market’s extreme potential.
The spread of online gambling has greatly helped the bottom lines of many brick and mortar establishments, especially those in Atlantic City, and there is sentiment in the market that sports betting may be well positioned to do the same thing for struggling casinos across the nation.
Boyd’s debt offering issued $700 million in senior notes, with an interest rate of 6% annually set to mature in August 2026.
Ratings agencies cautiously optimistic long-term
The company announced it is likely to see some $689 million in proceeds from the issue, which will be directed to general operational purposes, including acquisitions, expansion and existing debt reduction. Boyd currently holds $2.9 billion in long-term debt and some $200 million in cash and equivalents.
Ratings agencies have reacted to Body’s appetite for debt fuelled acquisitions with caution. After a spate of five acquisitions last year Moody’s moved Boyd from “positive” to “stable”. At the same time the ratings agency saw Boyd’s penchant for acquisition as a positive long-term development, as free cash flow from the acquisitions can be used to pay down the debt.
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