BetMGM EBITDA Positive in Q2, Entain Could Again Be Takeover Target Says Analyst

Posted on: July 26, 2023, 04:45h. 

Last updated on: July 27, 2023, 12:31h.

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

BetMGM’s increasingly sturdy financial performance could compel MGM Resorts International (NYSE: MGM) to revisit a takeover of Entain Plc (OTC: GMVHY), something the former’s management team said it’s not inclined to do.

Michigan iGaming sports betting online casino
Actor Jamie Foxx appears on a BetMGM billboard. The company’s strong results could renew MGM/Entain takeover talk. (Image: Detroit News)

The iGaming and online sportsbook operator provided investors with a financial update on Wednesday, noting it turned positive on the basis of earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second quarter, and that it could be EBITDA-positive for the back half of 2023. Adding to external speculation that MGM could again move on Entain is the point that BetMGM will likely become self-sustaining in the coming months, requiring no further investments from the two joint venture partners.

In a note to clients on Wednesday, Jefferies analyst James Wheatcroft said MGM could attempt another takeover of Entain as soon as next month. He added that the offer MGM made for the Ladbrokes owner in early 2021, which was deemed inadequate, would value the target at $29.68 a share today. That’s well above the $17.69 closing price in U.S. trading. Entain’s primary listing is in London and it trades over-the-counter in the U.S.

MGM executives have said they’re not interested in bidding anew for Entain, but they’ve also made it clear they’d like to control 100% of BetMGM.

BetMGM’s Impressive Financial Performance

While it trails rivals FanDuel and DraftKings (NASDAQ: DKNG) in terms of online sports wagering market share, BetMGM is notching impressive financial results.

Our financial guidance for the year remains on track – we expect to deliver $1.8 to $2.0 billion in full year revenue, as well as to be EBITDA positive in the second half of 2023,” said CEO Adam Greenblatt in a statement.

In the first half of this year, BetMGM posted same-state net revenue growth of 25%, while notching a 65% increase in per-player revenue among clients acquired in 2021 or earlier. With first half debuts in Massachusetts, Ohio, and Puerto Rico, the operator is live in 26 jurisdictions covering 46% of the U.S. adult population.

BeMGM’s first-half iGaming market share was 27%, good for one of the best percentages in the industry. The operator’s sports betting share is 11%, but that figure increases to 13% in markets in which the company was operational from day one.

How Tenable is MGM Buyout of Entain?

It remains to be seen if MGM makes another offer for Entain, or if the former buys the latter out of BetMGM. But there are some certainties. First, speculation to this effect remains rampant.

Second, an outright takeover of Entain won’t be cheap. The Coral owner has a market capitalization of $10.17 billion, and any suitor would have to offer more than that to get the conversation started. Additionally, Entain has been on a buying binge, gobbling up an assortment of smaller European gaming companies — assets that any potential buyer needs to assess.

The other certainties are that MGM has one of the industry’s strongest balance sheets, meaning it could make a significant deal if it so desires, and it reports second-quarter results on August 2. That could be an opportunity for management to discuss longer-ranging plans for BetMGM.