MGM’s largest shareholder, InterActiveCorp (IAC), has offered to invest another $1 billion in the company to help it acquire UK-based Entain PLC. Billionaire Barry Dillerowner, owner of the US media giant which has a 12% stake in MGM, supported the $11 billion takeover plans for Ladbrokes owner Entain Plc.
Before IAC’s latest indication, two offers were made by MGM to acquire Entain, who is already MGM’s partner on the BetMGM iGaming and sports betting business. Yet, both were rejected on similar grounds, with the British firm saying the offers were not adequate. However, the latest $11.06 billion bid for Entain put forward last week led Entain to take a pause compared to the emphatic head shake of the first time. With IAC’s latest offer for investment, MGM may make another bid to acquire Entain.
What Did IAC Say Exactly?
IAC, which acquired 12% interest in MGM last August via transactions worth over $1 billion, has dispatched a non-binding letter of intent backing the move. In the letter, IAC indicated its “current intention that IAC’s additional investment into MGM for these purposes could be up to $1 billion.” The New York-based holding company also indicated it would also consider funding a portion of a partial cash alternative should such an option be made available to Entain shareholders.
According to IAC’s stated belief, acquiring Entain would position the US casino operator as a “pure-play omnichannel global leader in gaming and entertainment.” Such a merger would also allow MGM to accelerate the growth and market penetration of its market-leading sports betting app, BetMGM. The shareholder believes that maximizing the value of BetMGM would enable the combined business to aggressively pursue its growth objectives such as new development in key international gaming markets, US online market penetration, future mergers and acquisitions, and returning capital to stakeholders.
IAC further noted that it continues to support this objective for MGM whether or not a transaction with the UK company is consummated.
What Is MGM Offering to Entain Shareholders?
MGM is proposing a transaction that will enable Entain shareholders to receive 0.6 shares in the suitor for each share of the target they own. In simpler words, Entain investors will own 41.5% of the combined company. MGM said a proposed merger with Entain would be “compelling” as it would increase the formidability of the combined group, besides helping grow BetMGM, one of the leading online sports betting companies in the US.
The US company is currently trading at 1463p, meaning investors are expecting another offer from MGM. This adds pressure on the negotiations for a merger. If the negotiations fail, it will negatively affect the existing 50-50 joint venture between the two companies amid a critical time when BetMGM is witnessing a boost in the US sports betting market.
According to UK law, MGM was compelled to divulge the details of the “non-binding letter of intent.” Per UK regulations, MGM has a February 1 deadline to either confirm it is making another bid for Entain or that it is just scrapping the proposal. Though the deadline can be extended, approval is required.
Entain owns renowned brands such as Ladbrokes and Coral, with business expanded across over a dozen countries. As of today, MGM is the only potential suitor for the British company.