US gambling giant MGM Resorts is once again considering a bid to acquire its BetMGM joint-venture partner Entain Plc, as dealmakers await for the UK Gambling Review to be concluded.
Citing ‘city sources’, the Daily Mail’s This is Money business news page stated that an M&A move would likely be reconsidered after the White Paper on the Gambling Act review is published – pledged by DCMS to occur in February.
An enforcement of strict compliance measures, such as affordability checks, wagering limits and further marketing restrictions, will likely see shares in FTSE100 Entain to fall substantially, favouring an MGM buyout.
The UK is a core centre of operations for Entain, where it operates its flagship Ladbrokes and Coral betting shops and online brands, as well as Gala Bingo.
Furthermore, since completing its leverage takeover of Ladbrokes Coral in 2018, Entain has further expanded its European portfolio acquiring the market leading assets of BetCity Netherlands, Baltic bookmaker Optibet, SuperBet Croatia and Bet.pt (Portugal).
At present, Entain operates over 25 B2C online gambling brands across 33 regulated online gambling markets – an attractive proposition for MGM which seeks to expand its gambling foothold beyond North American shores
Entain and MGM are also no strangers to each other, operating the BetMGM online sportsbook in the US as a joint venture since May 2020.
The Mail outlined that city analysts believe that a combination between the companies to create a transatlantic betting giant are ‘inevitable’, in which MGM carries first rights to acquire Entain as strategic partner for its US sportsbook venture.
However, MGM’s previous interest in merging with or acquiring its European partner have previously been shut down by the Isle of Man-based enterprise.
The group’s previous bid of £8.1bn was rejected by Entain back in January 2021, as Chairman Barry Gibson refused to put the offer to investors stating that the bid ‘significantly undervalued’ Entain’s long term prospects. MGM would later announce a withdrawal of its bid on 19 January 2021.
Commenting at the time, Bill Hornbuckle, CEO of MGM Resorts International, said: “BetMGM, our US sports betting and online gaming venture with Entain, remains a key priority for the Company as we continue to leverage our preeminent physical gaming, entertainment, and hospitality platform to expand digitally.
“We believe that BetMGM has established itself as a top three leader in its markets and we remain committed to working with Entain to ensure its strong momentum continues as it expects to be operational in 20 states by the end of 2021.”
In the two years since the first set of negotiations ended with rejection for MGM, Entain has pushed away other prospective buyers, including in the form of DraftKings, one of its US partner’s key rivals.
DraftKings confirmed a $20bn bid for the FTSE100 gambling group on 21 September 2021, but announced just over a month later on 26 October that it would not pursue such plans.
A key hurdle in the way of any potential merger between the two was Entain’s existing partnership with MGM, and the future of the BetMGM joint venture.
A statement from Entain at the time detailed continued confidence in its ongoing business activities, reading: “The Board strongly believes in the future prospects of Entain, underpinned by its leading market positions, world class management team and industry-leading proprietary technology.”
It is unclear how MGM would finance such a takeover, with Entain now valued at £800m more than January 2021 at £8.9bn – a valuation that is significantly exposed to UK regulatory developments.
Detailing a 6% year-on-year uptick in revenues to $3.4bn in its Q3 trading update, MGM stands in a stable financial position, but a buyout of Entain would closely follow its acquisition of LeoVegas last year for $604m, which added another 900 staff to its payroll.
Reports of a renewal of MGM’s interest in Entain come ahead of an upcoming announcement on BetMGM’s 2022 performance and new year outlook this Thursday.
MGM and Entain leadership are confident that the BetMGM venture will achieve US profitability in 2023.