Betting giant Entain, the Isle of Man-headquartered parent company of Ladbrokes, rejected an £8.1 billion ($11b) buyout offer from US partner MGM Resorts Monday, sparking a rally in its stock as MGM shares took a dip.
Entain officials said the offer from MGM, owner of several high-end resorts and casinos in Las Vegas and an emerging player in the online gambling space, undervalued the company and denied the offer outright.
Shares of Entain, which, in addition to Ladbrokes, owns Coral and its 3,300 brick-and-mortar bookmakers, sports-betting site Bwin, and online gaming site Partypoker, closed up nearly 25% at £14.16 a share on Monday. MGM Resorts International shares dipped almost 6% to close at $29.70.
Financial analysts said the leap in Entain’s price suggests the company may be worth more to MGM than the £13.83 per share bid. They may be right, as MGM is attempting to keep up with its US counterparts in a mad dash for online gambling supremacy as individual US states continue to open up.
US-UK Megamergers Commonplace by End of 2020
On Sept. 30, Caesars Entertainment bought London’s William Hill for £2.9 billion ($3.7b). It then expanded its partnership with the Walt Disney Company later in the fall. On Dec. 7, FOX Bet and Dublin-based parent company Flutter Entertainment partnered to become 95% shareholders in New York-based gambling site FanDuel.
“The US market is moving so quickly that to spend one or two years building that up, at the absolute minimum, is just time nobody has to spend,” said Alun Bowden, a senior consultant for European Markets at Irvine-Caif.-based Eilers & Krejcik Gaming. “The casino firms probably underestimated the growth of both the online gambling market there, and the impact on share prices.”
Bowden said a couple of years ago, US companies were interested in joint ventures and testing the UK markets’ waters. Now, with brick-and-mortar companies pivoting to a digital space, they want full ownership.
Entain, previously known as GVC, has been a gaming partner with MGM since the US Supreme Court voted to open individual states for sports gambling in 2018. Back then, the duo signed a $200 million deal to create a sports betting platform in the US that eventually became BetMGM.
Since then, myriad states have opened and shattered monthly handle expectations at the same time the COVID-19 pandemic has decimated brick-and-mortar business.
MGM’s Pandemic Pivot to Online Gambling
The inflection point for MGM came at the end of Q3 when CEO Bill Hornbuckle announced in the same breath that the company had laid off 62,000 workers in 2020 and started experiencing exponential growth in its online gambling properties, calling the latter the company’s “bright future.”
In the rejection of MGM’s offer on Monday, Entain officials said they want more information from its pursuer “in respect of the strategic rationale for a combination of the two companies.” The rejected proposal is the second in the last month. Media Mogul Barry Diller’s IAC, which also infused MGM with $1 billion in cash this fall, reportedly offered something in the neighborhood of $10 billion for Entain.
Diller and IAC, whose media footprint is mostly digital, is said to admire Entain’s technology stack and the slick UI of its products. Diller and IAC, as an investor in MGM, said last week they would infuse another billion dollars into MGM should the Entain acquisition go through.