Entain, the gaming company formerly known as GVC Holdings, helped MGM Resorts International get its sports gambling operations off the ground when the two entities partnered to launch BetMGM. They created Roar Digital to spearhead nationwide sportsbook efforts in the U.S. over two years ago and have both continued to open their wallets to help the company expand, but MGM might now think it’s time to take over completely. It is reportedly interested in buying out Entain, but nothing has yet been cemented.
The Wall Street Journal broke the news yesterday, explaining that it had received confirmation from unnamed sources that MGM was pushing to acquire the company. It reportedly had made an offer of $10 billion to buy Entain, but that offer proved to be less than appealing to its target, and MGM may have returned with a higher bid. That new bid was apparently made possible through some outside help, with InterActiveCorp (IAC) providing the additional support. IAC already owns 12% of MGM.
Entain’s market capitalization sits at around $9 billion and, as most high-profile deals go, anything less than at least one-quarter above that valuation most likely wouldn’t be considered. The Wall Street Journal suggests that the new bid could include both cash and equity, and is substantially more than the previous offer. That offer was based on a price of about $17.56 per Entain share, which, putting things into perspective, is already well above the $15.70 price Entain saw when the markets closed at the end of last week.
Mergers and acquisitions in the gaming space are expected to pick up over the next couple of years, and Caesars Entertainment is helping set the stage with its acquisition of William Hill. The sports gambling operator partnered with Caesars for the latter’s U.S. sportsbook, and the deal is expected to see Caesars control all U.S. activity while it sells the rest of William Hill’s operations. After finding approval from shareholders, that deal should be wrapped up before the end of June.
Across 2020, Entain saw its share price increase by around 25%, so it’s no surprise that it would reject a $10-billion offer. It knows what’s at stake and what the future holds, and should be expected to hold out for maximum returns. BetMGM operates in ten states, making it the fifth-largest sportsbook in the U.S., and is expected to double in size this year alone. That, coupled with the fact that Wall Street investors prefer to back companies with more control over their gaming operations, as opposed to partnerships, and Entain knows that it holds virtually all the cards if MGM is serious about buying it out.