Boyd Gaming’s sale of its 5% interest in FanDuel to Flutter Entertainment could influence market access fees across the industry. According to David Katz of Jefferies Equities Research, this stake has been “an underappreciated call option,” and the sale for $1.755 billion highlights its potential.
Katz clarified that, despite some surprise at the timing given the current agreement extending to 2028, the sale appears positive, balancing the risk-reward in the long-term U.S. online sports betting market. Net proceeds might equate to around $1.355 billion after tax deductions, and with the deal set to conclude in the third quarter, Flutter will fully own FanDuel while Boyd looks to reduce debt significantly.
Boyd and FanDuel expect to modify existing agreements, extending their market-access collaboration through 2038. This involves fixed fees per state for mobile sports-betting ops in states like Iowa and Indiana and online casino operations in Pennsylvania.
Moreover, FanDuel will operate Boyd’s retail sportsbooks outside Nevada until mid-2026, after which Boyd will assume control. Katz notes that while the board makes final decisions regarding fund allocations, the focus remains on debt reduction, which aligns with Boyd’s history of avoiding special dividends.
Katz suggests the revised agreement may be less favorable but still assures guaranteed revenue. With the previous market-access agreement dating back before the legalization of online sports betting, the shifts seemed inevitable. However, partnering with the leading U.S. online sports-betting operator remains advantageous for Boyd, especially with future legalizations.
Despite a projected EBITDAR loss of about $30 million, the net proceeds significantly balance this and promise share value growth. Boyd appears well-placed for modest growth among peers, reinforced by the financial strategy emphasizing debt management.
Impact of Boyd Gaming’s Sale of FanDuel Stake
David Politzer from J.P. Morgan offers a mixed perspective. The deal features a 14.6x multiple on FanDuel’s 2027 EBITDA guidance, compared to Boyd’s 7.8x projected earnings, translating to a $16.50 post-tax value for Boyd’s stake, compared to the $13 a share currently estimated. This transaction gives Boyd the chance to significantly reduce debt and save on interest payments, around $80 million annually.
However, Boyd’s restructuring from variable to fixed market-access fees means annual savings of $65 million for Flutter. Politzer appreciates Boyd’s stable capital allocation strategy, with consistent buybacks and balance sheet maintenance.
For broader significance, this transaction’s implications extend to DraftKings and Penn Entertainment with potential adaptations in market-access fee agreements to yield cost savings. Barry Jonas from Truist Securities describes it as mutually beneficial, citing Boyd’s earnings offset by post-debt repayment interest savings, while Flutter secures full FanDuel ownership with an attractive valuation.
Prospects After Boyd Gaming’s FanDuel Stake Sale
John DeCree of CBRE emphasizes that Boyd’s financial conservatism positions them favorably, with shares peaking despite sector shifts. The company’s focus on internal enhancements and mindful external investments, amid evolving M&A conditions, primes them for future developments.
Boyd leverages tax reductions from recent legislation, boosting consumer demand. Maintaining a Buy rating while raising target share prices, DeCree advocates Boyd remains a key long-term investment.
