Entain Draws Activist Action, New Investors Want Ricky Sandler on Board

Posted on: November 22, 2023, 12:57h. 

Last updated on: November 23, 2023, 11:41h.

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

The U.S.-listed shares of Entain Plc (OTC: GMVHY) rallied Wednesday following reports that activist investors recently built stakes in the Coral owner.

Entain CEO Jette Nygaard-Andersen in a presentation
Entain CEO Jette Nygaard-Andersen. Activist investors are building stakes in the gaming company and could push her out the door. (Image: Alamy)

Dendur Capital and Sached Heam Capital, two New York-based hedge funds, amassed positions in the gaming company. They are believed to be pushing Entain to grant Eminence Capital founder Ricky Sandler a board seat. Sandler, whose hedge fund is one of the largest shareholders in the sportsbook operator, publicly criticized Entain management.

In June, he bashed the $750 million purchase of STS Holding, noting the issuance of new stock to fund the deal signaled Entain’s lack of understanding of basic finance, or naivety among investors.

Five unidentified sources with knowledge of the matter told the Financial Times that Dendur Capital and Sached Heam Capital want Sandler installed as an Entain director. They also want him to be directly involved in filling several other vacancies on the board.

Sandler’s firm has been an Entain investor for more than three years, and as of June, owned 2.1% of the Ladbrokes owner’s shares outstanding.

 Activists Could Push Nygaard-Andersen Out

Amid the flurry of activist activity among Entain investors, there’s speculation that the new shareholders could move to push CEO Jette Nygaard-Andersen out.

Nygaard-Andersen assumed the top spot at the gaming company in January 2021, after Kenny Alexander abruptly departed. Previously, Nygaard-Andersen was a nonexecutive director at Entain and had no direct gaming industry experience. Criticism of her has heightened in the wake of the STS acquisition, and more recently, a disappointing 2023 net gaming revenue (NGR) forecast.

That disappointing outlook prompted concern among Entain investors that the operator is facing increasing regulatory headwinds in its home market of the UK. Investors also believe that it could draw unsolicited takeover bids from suitors attempting to capitalize on the operator’s depressed market capitalization.

Entain investors are also said to be worried about other internal matters at the company. For its part, the operator said it laid out “a clear plan” for organic expansion, and that Nygaard-Andersen landed 99% support among shareholders at the company’s annual meeting in April.

Where BetMGM Could Figure In

BetMGM, of which Entain owns 50%, wasn’t mentioned, and neither Dendur Capital, Eminence Capital, nor Sached Heam Capital commented to the FT. Still, it’s possible the U.S. online sportsbook and iGaming operator will figure into the equation at some point.

Activist investors push for change in a variety of forms, and it’s possible that they could encourage Entain to consider divesting its stake in BetMGM. After all, Nygaard-Andersen recently said joint ventures don’t last forever, and MGM Resorts International (NYSE: MGM) would likely be a willing buyer of Entain’s interest in the online gaming entity.

Selling its BetMGM interest would also serve the aim of reducing Entain’s capital commitments to the expensive U.S. market, while also potentially keeping would-be buyers at bay. That’s because BetMGM was widely viewed as the primary source of allure behind the 2021 acquisition offers made to Entain by MGM and DraftKings (NASDAQ: DKNG).