Financial industry voices deliberate on Boyd's sale of a 5% stake in FanDuel
Boyd Gaming has announced the sale of its 5% stake in FanDuel to Flutter Entertainment for $1.755 billion. The deal, expected to close in the third quarter, marks a significant milestone for Boyd Gaming and brings several key benefits for the company.
Financial Strength and Debt Reduction
The sale will provide Boyd Gaming with significant cash proceeds of approximately $1.755-$1.758 billion. The company plans to primarily use these funds to repay existing debt, thereby strengthening its balance sheet and enhancing credit flexibility. The sale will also provide Boyd with "dry powder" to reduce debt and annual interest payments by $80 million.
Focus on Core Casino Operations
With improved liquidity, Boyd can now focus on its core casino operations, including property investments, growth opportunities, and returning capital to shareholders. The transaction marks the completion of Boyd’s divestiture plan of its FanDuel stake and shifts its revenue exposure from variable equity returns to more stable fixed fees derived from ongoing market access arrangements with FanDuel’s U.S. operations.
Strategic Partnership Advantages
The sale does not sever Boyd's strategic partnership with Flutter Entertainment. Instead, it extends the partnership through 2038, enabling ongoing market access benefits such as an expected annual $65 million savings in states where FanDuel operates with Boyd.
Exceptional Return on Investment
The sale represents an exceptional return on investment, approximately 700%, confirming Boyd’s capital allocation acumen by monetizing a high-growth non-core asset.
Regulatory Risks
Potential risks or considerations include exposure to U.S. gaming competition and regulatory changes that may affect margins, though these are balanced against financial and strategic gains.
Analysts' Views
Several Wall Street analysts have expressed positive views about the sale. J.P. Morgan analyst David Politzer views the deal as mixed, while Barry Jonas with Truist Securities calls it a "win-win" for both Boyd and Flutter. John DeCree, director of equity research at CBRE, states that Boyd's war chest keeps getting bigger. DeCree maintains his Buy rating on Boyd and raises his price target to $100, implying an 8.6x multiple of 2026 Pro Forma EBITDA.
Another analyst suggested that the sale could result in a reduction in market-access fees for the industry, a possibility that could be realised if DraftKings follows suit and restructures its market access-fee agreements, similar to FanDuel, as Politzer suggests.
In summary, Boyd Gaming benefits from improved financial strength, a cleaner focus on its core businesses, stabilized revenue structures, and sustained strategic partnership advantages following the sale of its FanDuel stake to Flutter Entertainment. The M&A environment is expected to become more interesting in the future, and Boyd will be one of the best positioned companies in gaming to capitalize on it.
Boyd Gaming's decision to sell its 5% stake in FanDuel to Flutter Entertainment for $1.755 billion demonstrates an opportunity to invest the proceeds into core casino operations, such as property investments, growth opportunities, and returning capital to shareholders (Focus on Core Casino Operations). Additionally, the sale signifies an exceptional return on investment, approximating 700%, showcasing Boyd’s ability to monetize high-growth non-core assets (Exceptional Return on Investment).
