MGM Resorts International would likely have to offer at least $11.3 billion for UK gaming conglomerate Entain, according to analysts with Citi.
At first blush, that sounds like an odd number, considering MGM made an unsuccessful bid for Entain valued at $11.1 billion in January 2021. And since then, DraftKings made not one but two offers for the company — the last one being a cash-and-stock deal in September 2021 valued at $22.4 billion.
But three factors — the cratering of Entain’s stock price, a strong US dollar, and a weakened British pound, due largely to political uncertainty in the UK — have combined to make conditions more than ideal for MGM to take a second bite at the apple.
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That Was Then. This Is Now.
According to reports, Citi Analyst Monique Pollard said in a recent note to clients that a bid for Entain would likely need to represent at least a 50% premium over the going stock price to be successful.
By comparison, MGM’s first offer for Entain in January 2021 amounted to a 22% premium over the stock price at the time. DraftKings’ second offer in September 2021 was a 46.2% premium. Entain rejected both, saying they were too low.
MGM’s initial offer amounted to $18.79/share at the time. DraftKings’ first offer was $34/share, and its second was $38.50/share.
Shares of Entain closed at $13.05/share on the London Stock Exchange on Thursday — a decline of 39.4% from the stock price one year earlier ($21.54/share).
The London Stock Exchange added that the market cap for Entain was $7.5 billion. If MGM followed Pollard’s advice, they would offer roughly $11.3 billion for the company.
Meanwhile, the US dollar has been trading at a two-decade high, and the British pound is down more than 14% year-to-year. Some of that instability stems from worldwide inflation and fears of a global recession. Still, political upheaval in the UK also bears some of the blame — following months of political turmoil, UK Prime Minister Boris Johnson agreed to resign last week.
MGM Could Get Full Control of BetMGM
MGM has long coveted Entain, largely because a successful acquisition means it would have complete control of BetMGM, the thriving 50/50 joint venture with the Isle of Man-based gaming conglomerate.
Entain, formerly GVC Holdings, also has an extensive portfolio of casino and sports betting brands, including bwin, Coral, Ladbrokes, partypoker, and partycasino. partycasino and partypoker are active in the US, while bwin, partycasino, and partypoker recently launched in Ontario.
If successful, MGM could leverage Entain’s other brands to create a global giant in online poker, casino gaming, and sports betting with BetMGM.
MGM hasn’t been brooding over its failure to acquire Entain the first time. In May, it announced that it had offered about $607 million to purchase Sweden’s LeoVegas AB.
But the deal for LeoVegas is complicated by two issues — LeoVegas has long-standing plans to launch in New Jersey, but it would be in direct competition with BetMGM (and Entain) if it did so.
Additionally, authorities in Sweden have launched a probe into possible insider trading regarding MGM’s offer for the Stockholm-based gaming company.
