MGM Drops Entain Takeover Bid
Major American-based casino operators MGM Resorts has announced it will not now continue its takeover talks concerning Entain.
Entain, the owner of major UK brands Coral and Ladbrokes, among others, had refused an £8.1 billion initial offer from the famed Las Vegas firm. The offer came shortly before the February 1st deadline, set after initial talks between the two parties last year.
Entain’s Value Questioned
Giving its reasons for dropping out of the bid, MGM has said that it had “reflected on the recent limited engagement between the respective companies”, while now due to stock market rules, should they wish to come back with a refreshed offer, they will need to wait a further six months.
While still partners with MGM, Entain has said that it dismissed the £8.1 billion proposals because it undervalues their business. Financial experts in the field have labelled it as worth more like £10 billion.
Indeed, Entain’s shares were trading very well, and based on their value, it seemed MGM were likely to come back with an increased offer. However, challenging trading since then following the collapse’s news has actually decreased the share value to £7 billion.
Takeover Always Unlikely
The partnership previously entered into by the two companies, BetMGM will continue to offer sports betting and online gaming in the US. Already it is felt that BetMGM has established itself well and is a market leader, making the American-led firm keen to continue to work with Entain soon.
Entain, for their part, also appears committed to working with MGM on their joint-venture. However, it seems that it was felt from within that an actual takeover was never going to happen and that it would have needed to be an astonishingly high bid for shareholders to agree to it.
Entain, formerly GVC, continues to grow, including in the US, where more and more states are legalising online sports betting, keeping shareholders in the belief that their company will be worth more than by being owned by MGM Resorts.
MGM did make their first official offer, but even from their side it now appears that given some uncertainty over Entain’s leadership, it was always unlikely that the “knockout bid” that would have been needed was never likely to come. Chief executive of Entain, Shay Segev, in fact, left the company during the bidding process.
Better Bid Possible in the Future
Given that there is a natural gap and a cooling-off period enforced by stock market rules in the City, it remains possible that MGM could re-assess the situation and come back in six months with a different bid.
It’s clear there is still major interest from the Americans in Entain, primarily because the British firm has the technology and sports betting expertise needed for a successful business in this area as more states confirm the legality of sports betting online.
If the money is good enough, Entain is likely to approve a takeover. However, there is still one more potential blocker.
The government’s gambling review in the UK could have a detrimental impact on any deal, MGM perhaps not seeing the value in paying big bucks for a company the value of which could fall should certain gambling restrictions be put into law by Boris Johnson and co.
We await the next chapter of this fascinating story with great interest.
