Ladbrokes owner Entain rejects MGM takeover bid - Financial Times

Entain, the UK gambling group behind Ladbrokes Coral, has rejected an £8bn takeover proposal from US casino operator MGM Resorts, arguing that it “significantly undervalues” the company.

In a statement on Monday, the FTSE 100 company, which also owns sports-betting site Bwin and online gaming group Partypoker, added that it had requested more information from MGM “in respect of the strategic rationale for a combination of the two companies”.

The approach by MGM, owner of the Las Vegas Bellagio casino, comes as US operators battle for a share of America’s fast-growing online gambling and sports-betting market, which has taken off after a Supreme Court decision in 2018 eased regulations.

Under the takeover proposal, investors in the UK group would receive 0.6 MGM shares, valuing their Entain shares at 1,383p — a 22 per cent premium to its closing price on New Year’s Eve. Shares in Entain, previously known as GVC, surged more than 25 per cent in early trading on Monday.

MGM has indicated that a “limited partial cash alternative” would also be made available to Entain shareholders, the UK group said.

The US has become a promised land for betting companies looking to reduce their exposure to increasingly tight regulations in mature markets. At the same time, traditional land-based casino operators in the US, whose model was already in decline prior to the pandemic, have sought out expertise from European operators to boost their business online.

MGM and Entain have been partners in a $200m joint venture to pursue sports-betting opportunities in the US since 2018. The pair increased investment into the platform, called Roar Digital, to $450m last year.

Speculation that MGM might move to take over Entain has grown following rival casino operator Caesars Entertainment’s £2.9bn acquisition of its own sports-betting partner, the UK bookmaker William Hill.

Entain, which recently rebranded following the appointment of a new chief executive, has said it believes it can take a lead position in the US sports-betting market, which it estimates could reach $20bn in revenues by 2025 — up from about $1.4bn this year.

Greg Johnson, an analyst at Shore Capital, said that MGM’s proposal undervalued Entain’s core business and the size of the opportunity in the US and that he too struggled to see the rationale for the largely online Entain to merge with MGM, which predominantly runs bricks-and-mortar sites.

Analysts at investment bank Davy estimated the total value of Entain’s business, including its stake in the US joint venture, to be about £13.2bn “even on a conservative US addressable market basis”.

The MGM proposal is backed by the billionaire mogul Barry Diller’s IAC group and follows an earlier all-cash proposal worth about $10bn that was also rejected, according to people briefed about the matter.

Mr Diller’s IAC, which invested $1bn in MGM last year to boost the casino operator’s online business, is supportive of the bid for Entain and is willing to inject an extra $1bn to finance the takeover, said those with knowledge of the proposals.

David Satz, a former executive at Caesar’s with extensive expertise in the US gaming regulatory environment, was recently added to the board of directors of Entain to help the UK group assess its prospects in the US.

Mr Diller, who launched the Fox television network for Rupert Murdoch before building his own broadcasting and digital media empire, said in August that IAC’s experience could contribute to the growth of MGM’s online gaming business.

IAC owns scores of online and digital media brands, including news site The Daily Beast, video streaming website Vimeo and home improvement site Angie’s List.

Neither MGM nor IAC could be immediately reached for comment on Monday.

Under UK takeover rules, MGM has until February 1 to make a firm offer.

Let's block ads! (Why?)