MGM Resorts Evaluates Bid for Full Control of BetMGM

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Last week was a difficult one for Entain, the parent company of Ladbrokes and Coral, as it came under increased scrutiny from US activist hedge funds. Sachem Head Capital Management and Dendur Capital expressed their concerns about the company's leadership under CEO Jette Nygaard-Andersen and its stagnant share price. The funds joined forces with Eminence Capital, revealing a broader trend of investor dissatisfaction with the company.

MGM Resorts Unlikely to Bid for Entain

This week, it was reported that MGM Resorts is unlikely to attempt to acquire Entain. Rather than attempt to bid for the UK gambling company, MGM Resorts is reportedly interested in acquiring the remaining 50% stake in BetMGM, its joint venture with Entain. If this takes place, then MGM Resorts would gain complete control over BetMGM, including its technology and revenue streams. The specifics of this potential deal, including its cost, remain uncertain. However, given BetMGM's significant presence in the US, where it holds an 18% market share, it is likely to be extremely costly.

MGM Resorts' decision not to bid for Entain is influenced by various factors, including a previously unsuccessful bid and the competitive landscape. This includes the recent introduction of BetMGM in the UK's regulated gambling market and the challenge posed by Entain's launch of Sports Interaction and bwin in Ontario.

Goldman Sachs Revises Entain's Outlook

In the wake of these challenges, Entain's share price fell to a three-year low, compounded by Goldman Sachs downgrading the company's status from 'buy' to 'sell.' The investment bank cited multiple issues, including regulatory challenges and market competition, as reasons for this downgrade.

Goldman Sachs also revised its price target for Entain, reducing it significantly from 1450p to 820p. Ben Andrews, a Goldman Sachs research analyst, pointed out the company's agreement to pay a substantial settlement in an HMRC investigation and noted BetMGM's declining market share. Andrews predicts a downturn in Entain's online growth for the latter half of 2023 and the first half of 2024, with a potential rebound in the second half of 2024.