Meister’s Corvex Management Takes 4.4% Stake in Entain

Posted on: December 14, 2023, 11:21h. 

Last updated on: December 15, 2023, 09:07h.

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

Less than 24 hours after Jette Nygaard-Andersen resigned as chief executive officer of Entain (OTC: GMVHY), Keith Meister’s Corvex Management revealed it took a 4.4% stake in the Ladbrokes owner.

Corvex Kindred
Corvex Management founder Keith Meister at an investment conference in New York. His hedge fund took a 4.4% stake in Entain. (Image: Bloomberg)

Corvex is a major investor in MGM Resorts International (NYSE: MGM), where Meister is a board of directors member. The casino giant is Entain’s 50/50 partner in BetMGM. Meister’s firm joins Dendur Capital and Sached Heam Capital, two New York-based hedge funds, in recently revealing activist stakes in the Coral owner. Those two money managers bought shares in Entain before Nygaard-Andersen’s resignation.

We believe Entain is at a critical juncture and can benefit from the constructive engagement of a well-informed shareholder with substantial industry and company-specific experience and expertise,” said Corvex in a statement.

The hedge fund added it intends to work with Entain Chairman Barry Gibson and interim CEO Stella David “to be a helpful force for change.”

Corvex Entain Investment Could Stoke MGM Rumors

In midday trading, Entain’s U.S.-listed shares were higher by nearly 9%, indicating investors are enthusiastic about the departure of Nygaard-Andersen and Corvex taking a stake in the gaming company.

The news could also reignite speculation that MGM could revisit a takeover offer for Entain. Corvex is an activist investor, pushing for some form of change with its investment in the company. With Meister being an MGM director, he’d almost certainly vote in favor of the Bellagio operator bidding anew for its BetMGM partner.

Following Entain’s January 2021 rejection of a $11.06 billion takeover bid from MGM, speculation has been rampant that the casino company will eventually revisit an acquisition scenario. That’s though executives from that firm have said such a deal isn’t in the near offing. Entain investors are likely wishing their company had accepted that deal because the operator’s market value has since slumped to $6.83 billion.

Corvex and the other activists could push Entain to sell its BetMGM stake to MGM — something the latter would likely be agreeable to — but it’s not clear if that’s their plan of attack a the hedge fund is also a significant investor in Sweden’s Kindred Group. But given Entain’s recent missteps with acquisitions, it may be unlikely that he’d push for Entain to be a buyer of Kindred.

Entain Performance ‘Unacceptable’

Entain and Nygaard-Andersen became targets for activists following a debt-fueled $2 billion acquisition binge that saw the operator gobble up smaller sports betting outfits across Europe, seemingly to bulk up and fend off unsolicited takeover bids.

Those missteps, coupled with BetMGM’s declining market share in the U.S. and Entain’s recent $729 million payment to U.K. regulators to settle allegations of bribery related to its Tsh operations, likely sealed Nygaard-Andersen’s fate.

The former chief executive officer did herself no favors with her inability to control corporate costs and her knack for private air travel, which drew the ire of Entain investors, who dubbed her “Private Jette.” For its part, Corvex sees more change coming at the gaming company.

“While the Company’s recent management change was a necessary first step, further change is required. Simply put, Entain’s recent performance has been unacceptable, and all options must be considered to drive value,” concluded the money manager.