Ladbrokes owner Entain rejects £ 8 billion MGM acquisition approach

Entain, the UK gambling group behind Ladbrokes Coral, rejected a proposed £ 8 billion acquisition of US casino operator MGM Resorts, arguing that it “significantly underestimates” the company.

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

The approach of MGM, owner of the Las Vegas Bellagio casino, comes at a time when American operators are fighting for a slice of the rapidly growing American online gambling and gambling market, which took off after a 2018 Supreme Court decision facilitated regulations.

According to the proposed acquisition, investors in the UK group would receive 0.6 shares of MGM, valuing their Entain shares at 1,383 p – a 22 percent premium to the closing price on New Year’s Eve. Shares in Entain, formerly known as GVC, rose more than 25 percent in early trading on Monday.

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

The United States has become a promised land for betting companies looking to reduce their exposure to increasingly strict regulations in mature markets. At the same time, traditional land-based casino operators in the United States, whose model was already in decline before the pandemic, sought the experience of European operators to boost their online businesses.

MGM and Entain are partners in a $ 200 million joint venture to pursue sports betting opportunities in the U.S. since 2018. The pair increased investment in the platform, called Roar Digital, to $ 450 million last year.

Speculation that MGM may take control of Entain has increased after the £ 2.9 billion acquisition of rival casino operator Caesars Entertainment from its own sports betting partner, British bookmaker William Hill.

Entain, which recently changed its name after the appointment of a new chief executive, said it believed it could take a leading position in the United States sports betting market, which it estimates will reach $ 20 billion in revenue in 2025 – compared to US $ 1.4 billion this year.

Greg Johnson, an analyst at Shore Capital, said MGM’s proposal underestimated Entain’s core business and the size of the opportunity in the U.S. and that he also struggled to see why Entain largely online merged with MGM, which operates predominantly bricks. and mortar sites.

Analysts at investment bank Davy estimated the total value of Entain’s business, including its stake in the United States joint venture, at around £ 13.2 billion “even on a conservative addressable market basis in the United States”.

MGM’s proposal is supported by the IAC group of billionaire tycoon Barry Diller and follows an earlier all-cash proposal worth about $ 10 billion that was also rejected, according to people familiar with the matter.

Diller’s IAC, which invested $ 1 billion in MGM last year to boost the casino operator’s online business, supports the offer for Entain and is willing to inject an additional $ 1 billion to finance the acquisition, said those with knowledge of the proposals.

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

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

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

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

According to UK procurement rules, MGM has until February 1 to make a firm offer.