Penn Entertainment Puts Acquisitions Lower on Its Priority List

Penn Entertainment (NASDAQ: PENN) said that mergers and acquisitions are not near the top of its priority list. CEO Jay Snowden ranked the company's uses of capital, placing other options ahead of acquisitions.

Presenting the company's third-quarter results, Snowden said the priorities for capital use are debt reduction, a review of share buyback activity, and four growth projects completed recently. The Hollywood Casino Hotel Council Bluffs in Iowa (2028) and Boomtown New Orleans in New Orleans (2029) projects also rank ahead of acquisitions on this list.

Snowden said that if an acquisition is considered, it should offer a very high implied free cash flow yield and carry very little risk. He also said it should have strategic value for the company, such as providing a new market or a large database. He stressed that debt reduction is the top priority and that share buybacks could be examined more closely next year.

The comments come at a time when some rivals want to sell assets, and they have also raised the possibility of Penn returning to Las Vegas. Snowden said a quality, well-located asset in Las Vegas would add value to the company, and he believes this will happen one day. Meanwhile, there is widespread speculation that Fertitta Entertainment Inc. (FEI) could sell a Las Vegas hotel owned by the combined company if it completes its $17.6 billion acquisition of Caesars Entertainment (NASDAQ: CZR). Penn left Las Vegas in September 2022, when Bally's acquired the operating rights to the shuttered Tropicana.

Following the midterm election results in Texas, expectations have turned positive again for the expansion of the gaming industry and the inclusion of sports betting. Penn owns two of the three Class I thoroughbred racetracks in Texas. Snowden said the company has long operated in gaming through horse racing in the state, has two strong assets there, and is ready to play offense rather than defense.