Entain, the UK gaming conglomerate targeted for acquisition by DraftKings, said it has extended the deadline for the Boston-based company to improve upon its cash-and-stock offer of $22.5 billion.
On Tuesday — the day that DraftKings was required by UK regulators to either make an official offer for Entain or announce that it was breaking away from a deal – the board of directors at Entain issued a four-page statement that signals DraftKings’ current bid, its second, is still insufficient.
DraftKings now has until 5 pm London time on November 16 to make an official offer. Entain said the extension was requested, and granted, by a UK panel that administers a set of rules – specifically, the City Code on Takeovers and Mergers, aka the Takeover Code – for companies listed in the country, including those on the London Stock Exchange.
The board disclosed that it has been in discussions with DraftKings and that those talks are ongoing. But the board added that they “require a number of matters to be satisfactorily resolved that are fundamental to the structure and value” of a deal.
Those matters are, according to Entain:
- Total value creation for Entain shareholders, including share of potential synergies;
- Terms for any proposed technology supply agreement to BetMGM and MGM;
- Governance rights and value protection for the combined entity’s stake in BetMGM;
- Governance and management composition of the pro forma DraftKings-Entain entity; and
- Deliverability of the potential transaction, including anti-trust and regulatory clearances.
Entain owns half of BetMGM, a successful US joint venture (JV) and a direct competitor to DraftKings, with MGM Resorts International.
In a separate statement Tuesday, DraftKings said that it “will continue to engage in discussions [with Entain] and to conduct more substantive due diligence and analysis regarding its possible offer.”
DraftKings added that “while it progresses its discussions with Entain, it also continues to remain very focused on opportunities in the high growth North America market.”
In an exclusive, Susquehanna Financial Group analyst Joseph Stauff told Michigan Gaming Review on Tuesday that “under UK takeover rules, it is not unusual for there to be one 28-day extension of the original deadline in the case of complicated deals.
“An extension of time, in this case, indicates to me that the probability of an actual deal coming together is now higher,” Stauff said.
Earlier this month, MGM CEO Bill Hornbuckle asserted that DraftKings can’t consummate a deal with Entain without including MGM in the discussions. Hornbuckle asserted that doing so would effectively shut DraftKings out of competing in the US market.
Analysts aren’t sure what amount of leverage MGM has over a potential DraftKings-Entain deal since details of the JV have not been made publicly available. But Hornbuckle revealed that MGM had been in talks with DraftKings.
Hornbuckle also indicated that MGM, which made an unsuccessful bid to acquire Entain for $11 billion last January, is ultimately looking to control BetMGM.
One analyst estimated that MGM could wind up paying between $6.4 billion and $11.1 billion for the other half of BetMGM. But Stauff has said DraftKings would be foolish to let the other half of the JV go because it would give MGM a free hand to compete in the US market.
BetMGM became the second-biggest operator for sports betting and iGaming in the US in Q2 2021.
The JV was also cited by Entain as an opportunity to get in on “the rapidly growing North America market,” and for it to execute the board’s “growth and sustainability strategy.” Both statements seem to indicate that the future of BetMGM is a major sticking point to any potential deal with DraftKings.
News that DraftKings had made an offer for Entain broke on September 21 and has created quite a stir within the gaming industry. Some analysts speculate such a blockbuster deal could fuel a surge in M&A activity.
When Entain announced the DraftKings proposal, it took the unusual step of disclosing that it was the company’s second bite at the apple. DraftKings had reportedly offered $34 per share initially two days earlier, which the board at Entain had rejected. DraftKings then returned with the current offer of about $38.50 per share.
Entain, formerly GVC Holdings, has a large portfolio of casino and sports betting brands, many of which are not well known in the US. But it does own PartyCasino and partypoker, two brands that are active in the states.
