Ladbrokes owner Entain offered $11bn by MGM Resorts

(qlmbusinessnews.com via bbc.co.uk – – Mon, 4th Jan 2021) London, Uk – –

US casino giant MGM Resorts has made an $11bn (£8.1bn) offer for British gaming company Entain, which owns Ladbrokes.

The move is the latest attempt by a casino operator to move into the online gambling business.

In addition to its chain of High Street betting shops, UK-based Entain also owns a number of online sports betting and gambling sites.

Entain confirmed the offer, first reported by the Wall Street Journal, but said the price was too low.

It had recently rebuffed an earlier $10bn (£7.3bn) all-cash approach from MGM, the newspaper said.

In a statement, Entain said the latest bid approach “significantly undervalues the company and its prospects”.

MGM Resorts, which runs the Bellagio casino in Las Vegas, now has until the beginning of next month to decide whether to make a formal bid or to walk away.

FTSE 100-listed Entain. which renamed itself from GVC Holdings last month, describes itself as “one of the world's largest sports betting and gaming groups operating in the online and retail sector”.

Along with Ladbrokes, it also owns brands such as Bwin, Partypoker, Coral, Eurobet, Gala and Foxy Bingo.

After news of the latest offer for the firm, investors started betting on Entain, pushing its share price up by more than 25% to £14.30 a share – above MGM's offer of roughly £13.83 a share – a sign that market watchers are expecting a higher bid.

If the two firms do reach an agreement, it would follow another deal in September when MGM rival Caesars Entertainment agreed to buy UK-based William Hill for £3.7bn.

“Following Caesar's offer for William Hill last year, a bid by MGM for Ladbroke's owner Entain isn't exactly a surprise,” said Nicholas Hyett an analyst at Hargreaves Lansdown.

“The two are working together to take advantage of the recent legalisation of sports betting in the US, a market worth many billions of dollars a year.”

Analysis: By Dominic O'Connell

Predictions about the stockmarket have a habit of making the person trying to guess the future look foolish. No such problem for Laura Foll, a fund manager at the investment firm Janus Henderson. On the Today programme on Monday, she forecast more takeover offers for household names in Britain, noting that the UK markets remained unloved by investors and so – perhaps – undervalued.

An hour after the prediction a big offer duly landed, with Entain, the London-listed company that owns Ladbrokes and other gambling brands, saying it had received a takeover proposal from MGM Resorts, an American rival.

The US company is offering to pay shareholders in Entain not in cash, but in new MGM shares – an obvious move given the sky-high rating of US shares compared to those listed in London.

It looks a carbon copy of last year's deal where Caesars, best known for its Las Vegas properties, bought another venerable name in British bookmaking, William Hill. Get ready for more acquisitive foreign companies looking for deals in bargain basement London.

Covid headwinds

The new bid for Entain comes with financial backing from MGM's largest shareholder, InterActiveCorp (IAC), which took a 12% stake in MGM Resorts last August.

At the time, IAC's chief executive Barry Diller said it planned to work with MGM to expand its online gambling portfolio.

The attempted acquisition comes as the casino industry faces headwinds from the Covid-19 pandemic.

Bricks-and-mortar casino operators have struggled under travel restrictions.

The economy of Asian casino hub Macau shrank 49% in the first quarter of this year, while unemployment in Las Vegas reached 30% earlier in the year and remains well above the US average.

MGM Resorts, which is the operator of the Bellagio casino in Las Vegas, laid off 18,000 furloughed employees in the US in August.

Many online gambling companies, by contrast, saw a boost during Covid-19 restrictions, prompting many casino owners to pivot their businesses towards online.