Entain Mulls $22.4 Billion Takeover Bid After DraftKings Sweetens Deal

Potential acquisition is complex due to joint ownership of BetMGM with former suitor MGM, which said it must also agree to a deal.
Entain Mulls $22.4 Billion Takeover Bid After DraftKings Sweetens Deal
By
September 24, 2021

Entain, the UK-based gaming giant that owns half of BetMGM, said it has received two cash-and-stock offers from DraftKings to buy the company, the latest of which is valued at $22.5 billion.

The company confirmed Tuesday that it had received an offer from Boston-based DraftKings but did not disclose any details of the proposal—other than to say that there was “no certainty that an offer will be made,” and that UK rules require DraftKings, if it’s serious about acquiring Entain, must “announce a firm intention” to do so by October 19.

But in an unusual step, Entain made a second announcement Tuesday revealing that DraftKings had initially offered about $34 per share for the company, and that Entain’s board had rejected that offer. Entain did not disclose when DraftKings made the offer.

Entain went on to disclose that DraftKings had made a second offer of about $38.50 per share on September 19, with more than three-quarters financed with new DraftKings stock and the remainder with cash. The second offer represented a premium of 46.2% to Entain’s closing share price on September 20.

Based on Entain’s report that it had more than 585.6 million shares in issue as of June 30, the initial DraftKings proposal equates to a $20 billion buyout, while the second is valued at $22.4 billion.

Entain said it would “carefully consider” the second proposal and make an announcement “when appropriate.” The next day, it sent separate notices to its employees, shareholders and pension fund trustees to address the takeover bid.

MGM signals it wants to control BetMGM

An agreement between DraftKings and Entain could impact the online casino and sports betting markets in the US.

Entain, formerly GVC Holdings, has a large portfolio of casino and sports betting brands, including bwin, Coral, Ladbrokes, partypoker and PartyCasino. Some analysts have speculated that DraftKings may be interested in acquiring Entain’s expertise in these areas in order to compete with rivals in both spaces.

Other analysts suggest a DraftKings-Entain deal could be a harbinger for further M&A activity.

“DraftKings’ audacious bid indicates its willingness to go head-to-head with Flutter-owned FanDuel,” said Third Bridge analyst Harry Barnick. “With the wave of consolidation we are seeing in the market, including 888’s recent acquisition of William Hill’s international assets, investors’ will simply be wondering: which company could be targeted next?”

MGM Resorts International, which owns the other half of BetMGM, would be the X-factor for any deal as well. MGM issued its own statement Tuesday to say that it was aware of DraftKings’ offer for Entain and added that any deal “would require MGM’s consent.”

MGM added that it believes “having control of the BetMGM joint venture is an important step toward achieving its strategic objectives,” a strong indication that it has no intention of selling its half of the JV to DraftKings, one of its main rivals in US sports betting. BetMGM became the number two operator for sports betting and iGaming in the US in Q2 2021.

Still, MGM said that it plans to “engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”

Barnick noted that questions remain over what would happen to BetMGM, and whether a counteroffer—presumably by MGM itself—could “lead to a bidding war.” MGM made an unsuccessful offer to acquire Entain for $11 billion last January.

Chris Grove, analyst with Eilers & Krejcik Gaming, tweeted Tuesday that DraftKings’ offer “feels like a blocker bet.” And, like Barnick, he described the bid as “audacious.”

“Tons of value destruction if you’re DraftKings,” Grove wrote. “But you probably get a nice rebate selling the JV interest back to MGM. Regardless of what [anyone] thinks, you have to admire the sheer audacity plus the fact that DraftKings is in the position to make this offer at all.”

But on Thursday, Grove seemed to change his tune. “You know what? I think I’m coming around on this DraftKings bid for Entain.”

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