Less than a month after a report that Boyd Gaming ( BYD ) was considering a buyout of casino and sports betting operator Penn Entertainment ( PENN ) , a new bidder has emerged.

What Happened: FanDuel’s parent company, Flutter Entertainment ( FLUT ) , is considering teaming up with Boyd on a bid for Penn, according to TheDeal.com, citing unnamed sources.

Boyd would reportedly acquire the brick-and-mortar casino business from Penn; Flutter would get the digital arm that currently includes the ESPN Bet sportsbook and other assets.

After previously launching its sportsbook with Barstool Sports as Barstool Sportsbook, Penn sold the brand back to founder Dave Portnoy. It also announced a 10-year licensing agreement with The Walt Disney Company ( DIS ) for the ESPN brand to be used for a sportsbook.

Penn is paying $1.5 billion, plus up to $500 million in warrants, to Disney ( DIS ) for the ESPN brand and other considerations.

After launching last November, ESPN Bet gained initial market share and performed better than Barstool Sportsbook in several states. A report from iGamingBusiness shows ESPN Bet with a 6% market share. It is currently live in 18 states and plans to launch in New York later this year.

FanDuel and its competitor, DraftKings Inc ( DKNG ) , control around 60% to 70% of the online sports betting market, according to reports.

The reported buyout interest from Flutter and Boyd has led to Penn shares trading higher over the last month. The chart from Benzinga Pro below shows Penn shares up 13.5% over the last month.

Read Also: Penn Entertainment Shares Fall After Q1 Results: Here’s Why

Why It's Important: A Penn shareholder recently called for the company to potentially sell or abandon the interactive segment to focus on casinos.

While Penn has plans to grow its interactive segment and boost the market share of ESPN Bet, the reported interest could be too good to pass up with shareholder pressure.

There are major questions regarding the potential sale or merger involving Boyd and Flutter.

Penn Entertainment ( PENN ) is larger than Boyd when debt is factored in, but help from Flutter could alleviate the size constraints.

As two of the largest casino operators in the U.S., a potential merger could also face competitive concerns. FanDuel is the market leader in online sports betting and holds a near duopoly with DraftKings ( DKNG ). Boyd also owns a 5% stake in FanDuel that Flutter is reportedly interested in acquiring.

Smaller moves have happened in the space, but most sports betting companies are jockeying for third, fourth and fifth place after the market leaders.

Allowing Flutter to acquire the interactive segment from Penn may concern antitrust regulators and raise issues from competitors like BetMGM, Caesars and more.

There also is the issue of the Disney ( DIS ) license, which would likely need the media company to give the okay for Flutter to be able to continuing using the ESPN brand. Without the rights, it's unclear how valuable Penn's interactive customer base and technology would be to the market leader.

PENN Price Action: Penn shares trade at $20.03 versus a 52-week trading range of $13.50 to $29.38. Penn stock is down 23% year-to-date in 2024 and down 23.3% over the last year even after the surge in the last month.

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