MGM Unlikely to Bid Anew for Entain as Economy Crimps Financing

Posted on: October 5, 2022, 02:44h. 

Last updated on: October 5, 2022, 04:37h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The deteriorating global macroeconomic environment is crimping financing avenues, indicating a pause in large-scale mergers and acquisitions could be a result.

MGM Entain
MGM Grand on the Las Vegas Strip, seen above. MGM Resorts could encounter difficulty if it again tries to buy Entain. (Image: MGM Resorts)

Some analysts believe that’s relevant to suitors considering gaming industry targets, including MGM Resorts International (NYSE: MGM), potentially revisiting a takeover bid for Entain Plc (OTC: GMVHY). Even with the US dollar ranking as the world’s best-performing major currency this year and the British pound flailing, the Bellagio operator would likely still need to procure significant financing for another run at the Ladbrokes owner. That could be a dicey proposition with interest rates rising and lenders skittish about the broader economy.

If you want to go and raise money to buy something right now, it’s nigh-on impossible whatever market you’re in,” said M&A expert Paul Richardson in an interview with iGaming Business. “Leveraged finance is pretty much a driver and the costs are high right now – that then makes it harder.”

In January 2021, the Las Vegas-based casino operator bid $11.06 billion for Entain. The British bookmaker said the offer wasn’t adequate. MGM didn’t publicly up its offer, and the talks ultimately fell apart.

Next Steps for MGM, Entain

MGM has made no secret about its desire to control BetMGM — the iGaming and sportsbook entity that’s a 50/50 joint venture between the casino company and Entain.

Likewise, the Las Vegas-based company is displaying a willingness for dealmaking, and said it may eye future acquisitions. All that said, a couple of issues make acquiring Entain difficult. First, last October, Entain declined a $22.4 billion offer from DraftKings (NASDAQ: DKNG). Some analysts view that as the bar, making it unlikely the Coral owner would consider a takeover proposal at a lower price.

Second, Entain is on an acquisition spree of its own – one that some industry observers believe makes it difficult for a suitor to acquire the company. Some of Entain’s recent purchases may be appealing to MGM. Others, not so much.

Then there’s the matter of potentially taking on debt as rates rise and MGM sports junk credit ratings.

“If MGM were to try to buy Entain today, they’d still have to find a lot of money to pay for it — I would say it would be a challenge. They clearly have a good relationship with the banks over in the US. But they would need a lot of funds for their approach,” Richardson told iGaming Business.

Don’t Expect Much UK Gaming M&A

Although the sterling is in a downward spiral against the greenback, other British gaming companies are unlikely to be on the radars of US-based suitors.

As Richardson noted in the interview, FanDuel parent Flutter Entertainment (OTC: PDYPY) is too large to draw credible takeover bids. Likewise, Bet365 isn’t viewed as a contender for an acquisition offer.

888 Holdings has been the subject of takeover speculation, but its debt burden could be off-putting to suitors. Gaming technology company Playtech was nearly acquired by Aristocrat Leisure. But that deal collapsed earlier this year.