MGM Could Wait Before Bidding Anew for Entain

Posted on: November 13, 2023, 09:37h. 

Last updated on: November 14, 2023, 11:41h.

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

If MGM Resorts International (NYSE: MGM) is mulling another acquisition bid for Entain Plc (OTC: GMVHY), it could take a while for that offer to come to light.

Entain Avid
A Ladbrokes betting shop in the UK. Owner Entain probably won’t see a takeover offer from MGM Resorts in the near term, says a Jefferies analyst. (Image: Bloomberg)

That’s the take of Jefferies analyst James Wheatcroft who, in a new note to clients, downgraded the Ladbrokes owner to “hold” from “buy,” while trimming his price target on the gaming stock to GBP915 from GBP1,335. He also pared earnings forecasts on Entain through 2026 to better reflect the company’s investments in BetMGM and higher interest costs.

MGM currently has a lot on its plate, indicating a near-term offer for Entain may not materialize, noted Wheatcroft. Additionally, shares of the Coral owner have slumped as of late, perhaps signaling that any prospective buyer doesn’t need to rush to pitch an acquisition.

In January 2021, the Las Vegas-based gaming company offered $11.06 billion for its BetMGM partner, but Entain dismissed the bid as inadequate. At that time, there was speculation that the Bellagio operator would increase its offer, but that never materialized.

MGM’s Full Plate Could Delay Another Entain Bid

MGM management has been open about its desire to acquire the 50% of BetMGM it currently doesn’t own. Likewise, executives of that company have clearly indicated another run at Entain isn’t in the offing.

At the Global Gaming Expo (G2E) in Las Vegas last month, Entain CEO Jette Nygaard-Andersen told attendees that joint ventures don’t last forever, perhaps signaling that a day will come in which BetMGM’s ownership will look markedly different from its current form.

As Wheatcroft observed, MGM has a lot on its plate at the moment, including moving past a September ransomware attack and the Las Vegas Grand Prix later this week. If the Formula One race is a legitimate distraction from evaluating acquisitions, the same would almost certainly be true of the Super Bowl in February, indicating that it could be some time before MGM considers another run at Entain.

MGM Deploying Capital in Other Ways

Though not a distraction in the traditional sense of the word, as noted by Wheatcroft, MGM recently unveiled a new $2 billion share repurchase program. That doesn’t necessarily deter the gaming company from making another pass at Entain, because companies aren’t legally obligated to follow through on the entirety of announced stock buyback schemes.

That said, MGM has been a dedicated buyer of its own shares, repurchasing $6.2 billion of its stock from the start of 2021 through the end of the third quarter.

Whether or not that remains an obstacle to making a new offer for Entain remains to be seen. But with interest rates high, MGM may not want to tap debt markets to fund a deal for Entain, and it clearly has ways for deploying capital without spending big on its BetMGM partner.