Entain Rejects £8 Billion MGM Takeover Proposal
Entain (LON: ENT), the owner of Ladbrokes, has rejected an £8 billion takeover proposal put forward by US casino operator MGM Resorts (NYSE: MGM) saying that it “significantly undervalues” the company.
The company, which also owns gambling brands such as Coral, Bwin, and Partypoker, released a statement in which it said that it has asked MGM for more information about the “strategic rationale for a combination of the two companies.”
The takeover bid comes as US gambling operators compete for a portion of America’s rapidly expanding online gambling market, which has been growing exponentially since a 2018 Supreme Court decision relaxed regulations.
The proposal would see Entain’s investors receive 0.6 MGM shares, which values their Entain shares at 1,383p, a 22% premium to its closing price on New Year’s Eve. Following the bid, shares in Entain, formerly known as GVC, jumped more than 25% on Monday morning.
Entain and MGM signed a $200 million deal in July 2018 to create a sports betting platform in the US, and they increased their investment in the 50/50 partnership to $450 million in July 2020. This together with rival casino operator Caesars Entertainment’s £2.9 billion acquisition of William Hill, has led to speculation that MGM would move to take over Entain.
Entain has stated that it believes it can become the lead operator in the US sports betting market, which it thinks could reach $20 billion in revenues by 2025, up from roughly $1.4 billion last year.
Analysts at the Davy Group, a wealth management company, have estimated the total value of Entain’s business to be around £13.2 billion, “even on a conservative US addressable market basis.”
The MGM proposal has the backing of billionaire mogul Barry Diller’s IAC group, and it comes after an all-cash proposal worth around $10 billion was also rejected. IAC, which invested $1 billion in MGM last year to boost the company’s online business, is reportedly willing to inject an additional $1 billion to finance the takeover. Diller has said that he thinks the group’s experience could help MGM grow its online gambling business.
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