MGM Resorts International has seen its $11bn (£8.1bn) takeover offer for Entain, formerly operating as GVC Holdings, rebuffed on the grounds that it “significantly undervalues the company and its prospects”.
Entain, responding to market speculation, confirmed news of the offer and its subsequent rebuttal in a statement, saying: “The Board of Entain plc notes the recent press speculation. The Board of Entain confirms that it has received proposals from MGM Resorts International, its partner in the US market, concerning a possible offer for Entain.
“Under the terms of its most recent proposal, MGMRI would offer 0.6 MGMRI shares for each Entain share. Based on closing prices on 31 December 2020, being the last trading day prior to this announcement, MGMRI’s proposal represents a value of 1,383 pence per Entain share and a premium of 22% to Entain’s share price.
“Under the terms of the proposal, Entain shareholders would own approximately 41.5% of the enlarged MGMRI. MGMRI has indicated that a limited partial cash alternative would also be made available to Entain shareholders.
“Entain has informed MGMRI that it believes that the proposal significantly undervalues the company and its prospects. The Board has also asked MGMRI to provide additional information in respect of the strategic rationale for a combination of the two companies.”
In closing, Entain told investors that a further announcement will be made as appropriate but advised that in the meantime they are encouraged to take no action. “There can be no certainty that any offer will be made for the company, nor as to the terms on which any such offer might be made,” it concluded.
Acquiring Entain – the owner of brands including Coral, PartyPoker and Sportingbet – would give MGM Resorts a wider online sports betting presence. It would also enable the Las Vegas casino firm to keep pace with Caesars Entertainment, which is set to acquire William Hill plc, and Flutter Entertainment which is increasing its stake in FanDuel and has already formalized a deal with the Stars Group.
Harry Barnick, Senior Analyst for leisure sector companies at Third Bridge, offered an assessment of the situation, saying: “Entain has a rich history of operating sports books and this will be highly attractive to MGM as it looks to grow its sports betting offering in the US. MGM will also be keen to cross-sell its existing land-based customers into the sports betting offer”.
“Key synergies include the cross-sell opportunity from MGM’s land-based casino operations into Entain’s sports betting offer.” The acquisition will improve MGM’s chances of competing with power-houses DraftKings and FanDuel, as well as offsetting the competitive threat from Caesars acquisition of William Hill.”
He added: “Big questions remain over whether MGM will seek to integrate Entain’s UK and European assets or spin these off to an outside investor. Similarly, shareholders may worry that the current US partnership could be at risk if no deal is struck.”