US casino operator MGM Resorts has abandoned its bid to acquire its online gambling/sports betting joint venture partner Entain plc, leading to a steep plunge in the latter firm’s share price.
On Tuesday, MGM issued a statement saying it “does not intend to submit a revised proposal and it will not make a firm offer for Entain.” MGM said it arrived at this decision “after careful consideration and having reflected on the limited recent engagement between the respective companies.”
The news sparked a massive sell-off of Entain shares, which pushed the price down more than 17% before the panic subsided. Nevertheless, the shares closed out Tuesday’s trading down nearly 12% from Monday’s close. MGM, on the other hand, is currently trading up 3%.
Early in this new year, MGM publicly expressed interest in acquiring Entain, its partner in the ROAR Digital joint venture, which offers iGaming/betting in multiple US states via the BetMGM brand. After receiving a cooler than expected response to its initial $11b all-stock offer, MGM secured a commitment from shareholder Barry Diller’s InterActive Corp to sweeten the pot by up to $1b in cash.
But Entain continued to play coy, and the uncertainty surrounding its future undoubtedly played a role in the subsequent decision by Entain CEO Shay Segev to announce his intention to leave Entain for a co-CEO role at sports streaming platform DAZN.
Entain, which will issue a Q4 2020 trading update on Thursday, released a statement Tuesday saying it “has a clear growth and sustainability strategy” and it saw no difficulty in “continuing to work closely” with MGM on its US-facing joint venture.
MGM’s own statement on the decision to rescind its offer quoted CEO Bill Hornbuckle saying BetMGM “remains a key priority” and MGM remains “committed to working with Entain to ensure its strong momentum continues.”
All this investor reassurance likely won’t smooth over the palpable awkwardness that may hang over ROAR’s future strategy sessions. At any rate, not everyone is convinced that MGM has completely abandoned the idea of absorbing Entain and taking full control of BetMGM at some point in the future.
