Entain says £8bn MGM Resorts offer ‘significantly undervalues’ company but asks for more information

Responding to press speculation, the Board of Entain has confirmed that it has received proposals from its US partner MGM Resorts International (MGMRI) concerning a possible offer for the company, but has quickly poured cold water on any deal being agreed in the short-term.

Reports emerged in the Wall Street Journal yesterday that MGM had made a fresh approach for Entain after having a US$10bn (£7.3bn) cash offer rejected and Entain has informed the stock market about the casino operator’s latest cash & shares approach this morning.

In a statement, Entain said: “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.”

The 22% premium would value Entain almost £8.1bn, but the company’s Board of Directors has been unmoved by this second approach and asked for more details about MGM’s rationale.

It said: “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.”

Entain has encouraged its shareholders to take no action as of yet and added that 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.

Entain operates several global gaming brands, including Ladbrokes, Coral, Bwin, PartyPoker , SportingBet, Gala Bingo, Eurobet and Betboo, but is already a partner with MGM in the burgeoning US sports betting and gaming market where their joint venture BetMGM is already challenging the leading DraftKings and FanDuel brands. US stock market investors have become massively interested in the sports betting sector in the past 12 months, putting pressure on MGM Resorts to strengthen its hand in the market in response to deals such as Caesars Entertainment agreeing to acquire William Hill.