MGM Could Make Run at Skillz and Flutter, Says Report

Posted on: August 23, 2021, 08:29h. 

Last updated on: August 24, 2021, 09:09h.

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

Sportsbook operator Flutter Entertainment (OTC:PDYPY) and mobile games provider Skillz (NYSE:SKLZ) are possible takeover targets as consolidation looms over the fast-growing iGaming and sports wagering industries.

Skillz Flutter
A Paddy Power betting shop in the UK, pictured above. A recent report suggests parent companies Flutter and Skillz are takeover targets. (Image: This Is Money)

FanDuel parent Flutter and Skillz, a company that’s been public for less than a year, could draw attention from bidders, three unidentified industry sources told Sarah Cohen of CTFN in a report out last week.

A source cited in the article mentions MGM Resorts International (NYSE:MGM) or a technology company as possible suitors for Skillz.

Any prospective buyer making a run at the San Francisco-based company could be catching a falling knife or making a value argument. Skillz is among a growing list of firms, gaming and otherwise, that came to market via mergers with special purpose acquisition companies (SPACs). Those are experiencing significant share price erosion. Shares of the mobile games company are off 47.5 percent year-to-date and reside 77 percent below the February highs.

For Flutter, Surprising Mention as Possible Target

Regarding Flutter, the owner of the Betfair, PokerStars, and Sky Bet brands, among others, to be the mention of the operator as a potential buyout candidate is surprising.

The UK-based gaming company has a market capitalization of $32.78 billion, limiting the pool of credible suitors. Flutter also owns 95 percent of FanDuel — the crown jewel in its US portfolio. The parent is planning to spin off part of that business next year to unlock shareholder value. Some investors argue FanDuel would command a valuation in excess of rival DraftKings, which has a market cap of $20.79 billion.

There’s some credibility to that argument because FanDuel is the largest online sportsbook operator in the US with Flutter recently saying it has a 45 percent share in the world’s fastest-growing sports wagering market.

Any suitor would need to offer a hefty premium to get Flutter to the negotiating table, and given the operator’s acquisitive history, $1.26 billion in cash, and short-term investments at the end of the second quarter, it may be more buyer than the seller. Or it could opt for smaller dealers, or to simply stand pat, as it’s barely more than a year removed from acquiring The Stars Group (TSG) for $12 billion.

MGM/Skillz Rumor Interesting to Say the Least

As for MGM making a bid for Skillz, the former’s growing cash stockpile makes such a deal easily digestible. However, rumors aren’t dying that the Bellagio operator wants to revisit a bid for Entain Plc (OTC:GMVHY), its partner on the BetMGM business.

In fact, with BetMGM ascending to the number two spot behind FanDuel among domestic online sportsbook operators, and MGM’s cash hoard ballooning, market observers widely expect the casino giant to revisit a takeover after an $11.06 billion buyout offer was rejected in January.

With a platform revolving around mobile games and smaller esports tournaments, Skillz could be a more natural fit for a technology company than MGM.

Still, retail investors apparently like the idea of a takeover, as mentions of the name in the popular Reddit forum WallStreetBets surged 350 percent on Sunday, according to Quiver Quantitative data.