In a surprise move, MGM Resorts International announced Monday that it had floated an offer to buy Sweden’s LeoVegas AB in a cash deal valued at approximately $607 million.
At first blush, the offer appears to make sense and was applauded by analysts, as both MGM and LeoVegas businesses, to date, complement each other.
But a merger could delay long-awaited plans by LeoVegas to launch in New Jersey, its first US state, and could complicate MGM’s relationship with the UK’s Entain by putting itself in direct competition in certain markets. Entain and MGM each own half of BetMGM.
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The Proposal
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MGM’s offer is for 100% of the shares in LeoVegas, paid at a price of 61 Swedish krona (KR) or approximately $607 million. Shares of LeoVegas on the Stockholm Stock Exchange closed at 42.32 KR on Friday, which means MGM’s offer represents a premium of 44%.
An acceptance period for the offer will begin in June and expire in or around August, MGM said, with a settlement beginning in early September. The deal is subject to certain regulatory approvals and must also receive approval from 90% of LeoVegas’ shareholders. Closing is expected in 2H 2022.
“Our vision is to be the world’s premier gaming entertainment company and this strategic opportunity with LeoVegas will allow us to continue to grow our reach throughout the world,” said MGM CEO Bill Hornbuckle. “We have achieved remarkable success with BetMGM in the US and, with the acquisition of LeoVegas in Europe, we will expand our online gaming presence globally.”
Both companies held earnings calls to discuss Q1 2022 on Monday. During the LeoVegas meeting, Board Chairman Per Norman said the board “unanimously recommends the shareholders to accept this offer.”
“The board believes this logical, strategic fit between LeoVegas and MGM is very attractive and should serve both the companies and its employees very well in the future,” Norman said.
The “Elephant in the Room”
The narrative is currently of a complementary non-US strategy, but by owning LeoVegas MGM will clearly compete with Entain everywhere but the US, while the three will be going head-to-head in Canada.
On many levels, the deal harkens back to MGM’s failed bid to purchase Entain for $11 billion in January 2021.
In a note to clients, Jefferies & Co. analyst David Katz said MGM’s bid for LeoVegas fits the continuing narrative that the company is looking to grow, especially outside the US, and would acquire assets to achieve those ends. “Moreover, this does not preclude MGM from pursuing additional growth should opportunities present themselves,” Katz wrote.
But, in a separate note Monday, Regulus Partners called BetMGM, the joint venture between MGM and Entain, “the obvious elephant in the room.”
“Entain is successfully embedded in all major US states, has joint ownership of the BetMGM brand, and is far more capable than LeoVegas in sports betting and poker product categories,” Regulus wrote, adding “Entain is not mentioned in MGM’s press release, which perhaps tells its own story.
“The narrative is currently of a complementary non-US strategy, but by owning LeoVegas, MGM will clearly compete with Entain everywhere but the US, while the three will be going head-to-head in Canada.”
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New Jersey Plans Unclear
A merger could also complicate LeoVegas’ nearly year-old plans to launch in the New Jersey online casino market.
LeoVegas clinched an agreement with Caesars Entertainment in May 2021 to offer online casino games through one of Caesars’ land-based properties. The agreement called for LeoVegas to deploy its proprietary Rhino platform in the Garden State during 1H 2022 before expanding into other states.
Rhino is fully ported to Google Cloud for scalability and stability and includes casino gaming, live dealer, sports betting, and bingo. The platform is a big part of what makes LeoVegas one of the top iGaming platforms in the UK and Scandinavia.
“MGM has a land-based presence today and not really an online or digital presence,” LeoVegas CEO Gustav Hagman said during Monday’s Q1 2022 earnings call. “But with LeoVegas, they will get that. And we will spearhead their consolidation in the industry and help them to grow on the digital side for many, many years.”
LeoVegas holds licenses in eight European jurisdictions. It holds gaming licenses in Denmark, Italy, Malta, Spain, Sweden, and the UK, and has a sports betting license in Ireland. It also has a sports betting license and a casino license in the German federal state of Schleswig-Holstein.
Under its Maltese license, LeoVegas can also offer online gaming in EU countries without country-specific licenses, provided the jurisdiction in question doesn’t also have regulations requiring a local license — as is the case with Sweden and the UK.
