MGM Resorts International‘s bid to buy British gaming company and Ladbrokes owner Entain Plc (formerly known as GVC Holdings Plc) has hit a dead-end with news that MGM does not intend to submit revised proposal for the early-January bid that was rejected by the British company, a company that MGM has an existing relationship with.
Earlier this month, MGM submitted an $11 billion takeover bid for Entain that was quickly rejected. The bid was based on an exchange ratio of 0.6x, an evaluation that Entain brass felt was a “significantly undervaluing the company and its prospects.”
An Entain company statement last month read: “Entain has informed MGMRI that it believes that the proposal significantly undervalues the Company and its prospects. The Board has also asked MGMRI to provide additional information in respect of the strategic rationale for a combination of the two companies.” MGM has obviously decided against fulfilling that request.
About the Relationship
MGM and Entain had a history together before MGM International’s attempt to acquire the European company. The two had previously gotten together to form Roar Digital that co-created and co-owned one of the Heavyweight brand names in the US legal sports betting industry, BetMGM.
MGM Resorts International has made a concerted effort lately to get out from under Entain’s partial ownership of the BetMGM brand. MGM’s hope was to become sole owner of the juggernaut BetMGM. Entain’s top-tier European entities that include such as Ladbrokes Coral and Bwin were also somewhat attractive to MGM Resorts International.
During this time of rapid growth in the US legal sports betting industry, expansion is a recognized and accepted the need for the big players in the industry. The MGM brass has seen Caesars Entertainment recently acquire British-based William Hill and Flutter Entertainment has recently taken over Stars Group in order to gain a larger market share in the rapidly expanding US scene.
Simply put, MGM saw an opportunity to take over and control one of the biggest and most successful sports betting online sports betting apps while keeping up with some of the other Heavyweight in the business.
It’s All Good
MGM Resorts International, by putting a stop to a takeover bid for Entain is still committed to the joint venture and vows to keep its focus on the online platform co-created with its European partner.
MGM Resorts CEO Bill Hornbuckle is on record saying: “BetMGM, our US sports betting and online gaming venture with Entain, remains a key priority for the company as we continue to leverage our preeminent physical gaming, entertainment, and hospitality platform to expand digitally.
“We believe that BetMGM has established itself as a top three leader in its markets and we remain committed to working with Entain to ensure its strong momentum continues as it expects to be operational in 20 states by the end of 2021.”
A statement released by Entain later read: “Entain has a clear growth and sustainability strategy, backed by leading technology, that it is confident will deliver significant value for stakeholders. We look forward to continuing to work closely with MGMRI to drive further success in the US through the BetMGM joint venture.”
On Tuesday, Entain’s share price fell about 15% on the news that MGM International had decided not to beef up their offer for the company. The company shares landed about where they were before news of MGM’s initial offer.
Other than that, there should, in theory, be minimal effects on both Entain and MGM International. In the end, they still own BetMGM which has exponentially grown in the exploding US market the last year and despite the effects of COVID-19.
JP Morgan analysts commented on the developments by saying: “While we are genuinely surprised MGM didn’t up its consideration …we don’t think this changes MGM’s ability to secure equity value enhancing benefits from the attractively growing US sports betting and iGaming pie,”.
Many feel that a better MGM offer for Entain is not totally dead, especially since the Caesars/William Hill is set to close and other similar deals are in the works. MGM must be cognisant that sports betting entities’ value isn’t going down anytime soon and the sooner the better to act on any acquisition.