MGM Resorts International In Talks to Acquire Entain

The US legal online gambling industry became one of the few economic bright spots during 2020, and it looks as though some of the industry Heavyweights are looking to keep the momentum going into 2021. Reports surfaced this week of MGM Resorts International attempting to buy British gaming company and Ladbrokes owner Entain Plc (formerly known as GVC Holdings Plc) in a similar acquisition model that we saw last year when Caesars bought a stake in another British-based gambling giant, William Hill.

It is clear that the biggest legal gambling players in the market are attempting to improve their standing, not only in the US but also globally. For MGM, Entain was a logical target based on the relationship the two companies already had. According to MGM, the acquisition during this time of rapid growth for the industry would “expand and diversify the company’s operations, product offerings and earnings”.

The offer was made and quickly rejected by Entain however in what was a swift and decisive decision by the British bookmaker.

A Little Background

It was back in 2018, when sports betting became legal in the US that MGM forged a relationship with Entain to form Roar Digital. Both are joint owners of the BetMGM which has grown to become one of, if not the most successful online gambling brand in the US market and is live in more than a dozen US states.

MGM resorts has been trying to gain some market-share in the exploding US market since and in the background has been trying to get out from underneath the Entain partnership, which still owns part of the lucrative BetMGM brand along with MGM Resorts International.

Not only does Entain have partial control of BetMGM, but it also boasts a slew of top-tier European online gambling sites and brands such as Ladbrokes Coral and Bwin, which are attractive brands unto themselves. Entain’s European brands hold licenses in more than 20 countries around the globe and employ more than 24,000 in five continents.

It is this pre-existing relationship between the two companies and the potential of Entain’s stand-alone companies that has made the possibility of an MGM Resorts acquisition viable, possible and likely game-changing, if and when the right offer comes along.

About That Offer

It was earlier this year that BetMGM and Entain stepped up their investment in BetMGM to bolster the Roar Digital brand in the increasingly expanding and lucrative US legal sports betting market. It was right around that time that Entain Plc commenced talks about a possible takeover bid for Entain.

On Monday it was reported that MGM International offered $11.1 billion to Entain, which represents a 22% premium over its closing price on December 31. Under the proposed terms, Entain investors would exchange stock for 0.6 of a share of MGM and would hold about 42% of the combined business, the London-listed company said in a statement Monday.

MGM would gain full control of Roar Digital, the US joint venture and take over control of Entain's European brands, although no firm plan for those brands has been identified.

Rejected!

Not long after the reported offer from MGM International, news surfaced of Entain's rejection of the offer citing MGM's “significantly undervalued” proposal. A company statement 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."

It appears that the Entain brass realized the overall value of their present company and what the future of the legal gambling industry will potentially look like during this time of rapid expansion in the global online betting market.

The rejection doesn't necessarily mean that MGM's interest in Entain is dead, it just means that the US company will have to step up their game in order to gain 100% control of BetMGM and acquire some new sites that have been largely successful in the European market.

Time will tell but is the Caesars/William Hill deal is any indication, it likely won’t be long before MGM ups their offer and becomes a global behemoth.

The legal global gambling gold rush continues.