MGM Proposes $11.06 Billion Entain Takeover, But Target Says That’s Not Adequate

Posted on: January 4, 2021, 09:02h. 

Last updated on: January 4, 2021, 11:41h.

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

MGM Resorts International (NYSE:MGM) is offering $11.06 billion for Entain Plc (OTC:GMVHY). But the British bookmaker says that’s not enough.

MGM Entain
A Ladbrokes betting shop in the UK. Owner Entain rejected a takeover offer from MGM Resorts International. (Image: The Guardian)

Reports surfaced Sunday that the Mirage operator is seeking to acquire its partner in the BetMGM online casinos and sports betting venture. The reports also said that the Las Vegas-based company previously made a $10 billion pitch to the Ladbrokes owner that was turned away.

The company formerly is known as GVC Holdings Plc. Today Entain confirmed receiving a new proposal from MGM, one offering 0.6 shares of the US gaming company for each share of the UK-based firm. That means Entain investors would own 41.5 percent of the combined company. That’s not enough for the target’s tastes.

Entain has informed MGM that it believes that the proposal significantly undervalues the Company and its prospects. The Board has also asked MGM to provide additional information in respect of the strategic rationale for a combination of the two companies,” according to a statement issued by Entain.

The offer values the owner of the Coral betting brand at a 22 percent premium to where it closed last Friday. While it appears MGM may need to up its bid, Entain stock is soaring today, ranking as the best-performing member of the FTSE 100. Its US-listed shares, which trade over-the-counter, are up almost 27 percent at this writing.

Next Steps for MGM

It remains to be seen if the Bellagio operator will up its offer for Entain. But speculation surfaced yesterday that the new proposal includes financing from Barry Diller’s IAC/InterActiveCorp (NASDAQ:IAC). IAC made a $1 billion investment in MGM last August, making it the company’s largest investor.

The largest operator on the Las Vegas Strip has $5.9 billion in capital and has been successful in raising cash when needed, indicating it has levers to pull should it opt to boost its Entain bid, and maybe motivated to do so.

As BetMGM is currently structured, MGM and Entain share the economic rewards, as both companies allocated financial resources to get the business off the ground in 2021. But marriage would create one of the few gaming companies with both an expansive brick-and-mortar casino roster and deep internet reach.

Investors are displaying a preference for such deals, as highlighted by the reaction to the pending takeover of William Hill (OCT:WIMHY) by Caesars Entertainment (NASDAQ:CZR).

MGM Has Leverage

It’s not immediately clear if another suitor will pursue Entain.

There can be no certainty that any offer will be made for the Company, nor as to the terms on which any such offer might be made,” according to the company.

At this point, it’s speculative if another potential buyer emerges for Entain. But if that happens, MGM has cards to play.

The success of BetMGM is largely tethered to that recognizable branding and the US-based company’s ability to procure online gaming skins in domestic markets, many of which it operates land-based casinos in. Additionally, M life Rewards, MGM’s loyalty program, has 34 million members, providing a platform for iGaming and sports betting growth.

Caesars was able to affect similar leverage with William Hill, saying that if the British company accepted another takeover offer, it would lose its US agreement with the casino giant.