MGM Monitoring DraftKings/Entain Situation, Says Consent Needed for Transaction

Posted on: September 21, 2021, 09:58h. 

Last updated on: September 22, 2021, 08:59h.

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

MGM Resorts International (NYSE:MGM) is making its voice heard in the matter of DraftKings (NASDAQ:DKNG) delivering a $20 billion takeover offer for Entain Plc (OTC:GMVHY).

MGM Entain
Leo, MGM’s golden lion statue stands before the MGM building, above. MGM is watching the DraftKings/Entain takeover situation. The casino operator says its consent is required for such a deal. (Image: Pinterest)

In a stunning move, DraftKings is offering $20 billion in cash and equity for Entain. Entain is MGM’s 50/50 partner on the BetMGM venture. Now, the casino operator and previous Entain suitor are responding, saying it’s “aware” of the bid while making clear any such deal requires the approval of the Las Vegas-based gaming company.

MGM is Entain’s exclusive partner in the US online sports betting and iGaming market through our highly successful 50/50 joint venture BetMGM LLC. As a consequence, any transaction whereby Entain or its affiliates would own a competing business in the US would require MGM’s consent,” according to a statement issued by the Bellagio operator.

Earlier today, Entain confirmed receipt of a cash and stock takeover proposal from DraftKings, though the target didn’t specify a price point. In January, MGM offered $11.06 billion in equity for the Ladbrokes owner. But that bid was turned back.

Could MGM Tussle with DraftKings for Entain?

In the wake of MGM missing out on an Entain takeover, speculation the suitor would return with another offer lingered. That ramped up in recent months as BetMGM’s market share and MGM’s cash position ballooned. The casino operator isn’t hiding from the fact control of the iGaming and sports wagering unit is desirable.

“MGM’s priority is to ensure that BetMGM continues to capture the growing US online opportunity and realizing MGM’s vision of becoming a premier global gaming entertainment company,” said the company in the statement. “MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.”

It’s not immediately clear if a bidding war for Entain will ensue. But if it does, $20 billion is the floor. The other element of clarity arrives in the form of the target wanting cash to be involved in the deal. The DraftKings proposal has that, while MGM’s January offer did not include cash. It’s believed that’s a primary reason Entain rejected that bid.

While Entain’s enterprise value is now north of $18 billion, MGM has the firepower to potentially top DraftKings’ offer. Due to various asset sales, the casino giant’s cash position is growing, and Barry Diller’s IAC/InterActiveCorp (NASDAQ:IAC) — the largest MGM shareholder — previously said it would provide capital for an Entain acquisition.

Solutions Won’t Be Easy

MGM is signaling a willingness to work with DraftKings and Entain to solve the exclusivity accords issue.

“MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives,” said the casino company.

What form those solutions take remains to be seen. Entain is responsible to its investors, and if it turns back a $20 billion takeover offer, there need to be good reasons why that happens.

For its part, MGM is bullish on iGaming and sports wagering, and it readily acknowledges regret over not controlling 100 percent of BetMGM. Meaning it’s unlikely to go quietly into the night simply because there’s another suitor for Entain.

DraftKings is in an interesting position in its own right. Assuming it acquires Entain, it’d likely have pony up more cash to remove MGM from the equation or leave BetMGM as it is, becoming strange bedfellows with the casino operator in the process.