MGM Drops Takeover Plans For Entain After Rejected $11bn Proposal

MGM Resorts International will not pursue a takeover of Entain after the UK-based gambling company rejected two recent bids.

In Tuesday’s announcement, Las Vegas-based casino giant said it no longer intends to submit a revised proposal, nor will it make a firm offer for Entain Plc. “After careful consideration on the limited recent engagement between the …companies regarding MGM’s reject all-stock proposal… it (MGM) does not intend to submit a revised proposal, and it will not make a firm offer for Entain.” The British company’s shares sank 16% in London following the announcement.

Entain, the owner of Ladbrokes and Coral, had rejected an initial $11 billion takeover proposal earlier this month. Under UK regulations, MGM had until February to make a firm bid after it was confirmed that the company had made a proposal to acquire Entain, with which it already operates a joint-venture in the US. Immediately following MGM’s $11 billion bid, Entain said the offer “significantly” undervalued the British company. Under City rules on the takeover, MGM cannot make a new offer until six months from now.

How Have We Reached Here?

In 2018, MGM Resorts International and GVC Holdings PLC – which rebranded to Entain in November last year – announced a 50/50 joint venture to create an online sports betting platform in the US. The platform that the two entities co-parent is BetMGM, one of the leading digital sports betting companies in the US.

Considering the ever-increasing potential, MGM sought to reap the maximum benefits from a flourishing sports betting industry by following a recent example from Caesars Entertainment, which took over another British bookmaker, William Hill. However, Entain rejected two takeover offers from its American partner. The last one, which was worth roughly around $11 billion, valued the British company at 1,383 pence per share, equaling a 22% premium to the share price by the close of 2020. Still, experts predicted another offer forthcoming, and it evidently came from MGM’s largest shareholder InterActive Corp (IAC), which offered another $1 billion to help get the deal done.

The casino company did not elaborate on the reasons for its recently announced U-turn. However, some believe the recent departure of Entain CEO Shay Segev, who remained in office for a brief period of five months, may have played a role.

The Future of BetMGM

Following MGM’s initial offer for the British company, Entain shares surged 25%. This suggested that a higher offer was coming, if not from MGM, then from another potent rival company. However, following the most recent announcement, Entain’s stock dipped 15% in London, while MGM’s rose 2.6%.

The attention now diverts to the joint venture, BetMGM, which could be threatened following the failed talks between the two entities. While terming BetMGM as a “key priority,” MGM CEO Bill Hornbuckle said, “We believe BetMGM has established itself as a top-three leader in its market, and MGM remains committed to working with Entain to ensure its momentum continues.” Hornbuckle said the BetMGM, which currently operates in more than a dozen states, will be operational in as many as 20 states by the end of this year.

In a separate statement, Entain also dismissed any concerns regarding the joint venture. The British company said it looked forward to continuing to work closely with its American partner to push further success in the US via the BetMGM joint venture.

Can MGM Try Again?

Following a six-month cooling-off period imposed by City rules, MGM can try another attempt at converting its 50/50 BetMGM joint venture with Entain into full ownership.

The US casino operator is particularly interested in utilizing Entain’s technology and sports betting expertise to capitalize on the rapidly growing sports betting in the US, following the Supreme Court’s 2018 PASPA decision that had banned the industry outside of Nevada for decades.

MGM attempted to acquire Entain earlier this month after its US rival Caesars acquired William Hill for $3.7 billion.