Shares in Entain Plc, formerly GVC Holdings, skyrocketed on January 4 following an £8.1 billion takeover bid from American gambling giants MGM Resorts. Investors pushed Entain’s share price up by 25%, closing at £14.16 per share, up from £11.33 per share at close of trading on January 1.
MGM Resorts has offered 0.6 of its shares for each Entain share. Based on Entain’s closing price on December 31, 2020, this represents a 22% premium of Entain’s share price. Should the deal go through, Entain shareholders would own 41.5% of the enlarged company.
Entain, owners of partypoker and Ladbrokes-Coral among others, said the offer significantly undervalues the company, its prospects, and potential. MGM Resorts’ offer was the equivalent of £13.83 per share. The massive jump in Entain’s share price suggests MGM Resorts could return with an increased offer.
British Firms Flock to the United States
This move comes only a couple of months after Caesars Entertainment agreed to purchase British gambling firm William Hill for £2.9 billion. Only a month ago, Flutter Entertainment increased its stake in U.S-facing FanDuel and now controls 95% of the company.
There has been a flurry of British gambling companies joining forces with American casino operators since the US Supreme Court legalised sports betting in 2018. State laws require a partnership with local US casino operators who traditionally hold the sports betting licences in the United States.
It appears that the US casino investors are no longer willing to share the spoils by entering partnerships with established gambling companies from the United Kingdom and are attempting to acquire them outright.
MGM Resorts and Entain entered a 50/50 joint venture in 2018 which they called BetMGM. The partnership offers U.S. residents sports betting and casino games in US states where this is permitted. There are now 19 states where sports betting is now allowed and more are expected to follow in the near future.
Taking over Entain would be a sweet bit of business for MGM Resorts. MGM’s expertise is in the brick-and-mortar casino world with the Bellagio being its flagship property. Entain has everything in place to hit the ground running in the United States.
With more than 3,300 high street betting shops, massive, established online sports betting, bingo, poker, online casino sites, and a commitment to drawing 100% of its revenues from regulated markets by 2023 (it currently draws 95-99%), Entain seems the perfect choice for MGM Resorts to expand across the pond.
Under the UK takeover law, MGM Resorts has until 5:00 p.m. on February 1 to officially announce its intention to make a formal offer or to withdraw.