Entain investor demands focus on BetMGM and blasts $957m Polish sportsbook move

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Entain investor Eminence Capital has written to the company’s board of directors to place suitable value on its BetMGM JV as it scolded its latest M&A move in Europe

Last week, Entain announced it agreed to a deal worth around £750m ($957m) to buy Polish sportsbook operator STS as part of its ongoing M&A strategy on the continent. 

However, Eminence Capital, which holds around 2.1% of Entain’s shares’, directed a heated letter to the board to air its frustrations with this latest move. 

Eminence CEO Ricky Sandler criticized Entain for allowing a £600m ($766m) bookbuild to fund the acquisition of STS Group, through the issuance of new shares, which represents approximately 8% of its market capitalization.

Sandler wrote: “Over the last several years, we have engaged in constructive conversations with Entain’s Chairman of the Board, CEO, and CFO, and have always appreciated the Company’s willingness to listen to our views about the best way to maximize long-term shareholder value. 

“We have been explicit that Entain has earned the right to continue its pursuit of strategic targets within the global online gaming industry, but that equally important is funding these deals with the lowest cost of capital. We believe that multiple attractive and value-creating paths exist for Entain to raise capital to fund its M&A initiatives, including the potential divestiture of some or all of its stake in the BetMGM JV.”

Sandler went on to describe Entain’s latest move as “perplexing on many levels”, given that Entain’s share price fell 8%, knocking off over $750m in market value, in the days after the announcement. 

Instead, the Eminence CEO noted that shareholder preference could be to support a full sale to MGM “at a materially lower price than previously assumed” if Entain does not respond adequately to this “wake-up call.”

Sandler continued: “The market reaction to this equity offering should be a wake-up call to Entain’s tone deaf Board and management team. We can assure you that this particular shareholder is outraged and in light of the movement in the Company’s share price we are clearly not alone in that sentiment. 

“As shareholders lose confidence in Entain’s ability to allocate capital and create long-term value, it is quite likely they will support a sale of the company to MGM at a materially lower price than previously assumed.”

MGM Resorts International had a bid rejected for the acquisition of Entain back in 2021 and, since then, has reneged on its interest in acquiring its JV partner. Instead, the two operators have doubled down on their partnership to keep growing the BetMGM brand, which is the market leader in US online casino and holds a 21% sports betting market share.