MGM Resorts Aims to Take Over Its BetMGM Partner Entain; Entain Says the Offer ‘Undervalues’ It

Article by : Helen Jan 19, 2021

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According to a Wall Street Journal report that broke out on January 4, MGM Resorts is in the works to acquire its current UK-based joint venture partner Entain. The two companies partnered up in 2018 to develop BetMGM, an online sports betting and digital entertainment platform.

The initial offer MGM Resorts put on the table was around $10 billion, but it was “rebuffed” by Entain. So, the casino mogul attempted to sweeten the deal and upped it to $11.06 billion (£8.09 billion). The new proposal was backed by the major stakeholder of MGM Resorts, InterActiveCorp (IAC), which was behind the additional funds for a more tempting offer.

In an official statement released the same day as the Wall Street Journal article, MGM Resorts confirmed the proposal. The company also explained that it views the takeover as a great opportunity to “deliver full control of the BetMGM business to leverage the rapidly growing U.S. iGaming and sports betting opportunity,” as well as “position the [c]ompany as a global gaming company across both online and retail with a leading end-to-end technology stack.”

Entain, however, wasn’t thrilled by the $11 billion offer and said it “significantly undervalue[d] the company and its prospects.” MGM Resorts also stated that there is no 100% guarantee that an offer for acquiring Entain will be officially made. Several days after MGM Resorts approached Entain with an acquisition offer, Entain’s CEO Shay Segev announced he is going to step down from his role either in 6 months or immediately after the company finds his replacement.

According to analysts at Jefferies and Peel Hunt, his departure makes the takeover by MGM Resorts more likely. “The timing is especially awkward given the ongoing situation with MGM, but we think MGM may now be more encouraged to opportunistically raise its bid,” Jefferies said.

However, according to a Hargreaves Lansdown analyst Nicholas Hyett (as quoted by Reuters), “Entain is a far more global and more integrated operation – operating online gaming sites around the world as well as a high street estate. That makes folding the non-US operations into MGM or spinning them off separately a far greater challenge.”

Entain is a too-sweet part of the pie for MGM Resort to just back down after two acquisition proposals. It would be no surprise if the predator were to put a bigger wad down on the table.

While MGM Resorts’ bottom line did suffer from COVID-19-related disruptions throughout 2020 (it reported $602 million in net losses for 3Q2020 and $864 million in net losses for 9M2020), it was one of the few lucky casino operators to have online betting to fall back onto.

Following the 2018 decision of the US Supreme Court that paved the way for the state legislatures to legalize sports betting, MGM Resorts got into the game and joined forces with Entain in a joint venture to develop and launch BetMGM, a “sports betting and digital gaming entertainment company.”

Fast forward to 2020 and the beginning of the pandemic that shut down MGM land-based casinos more than once throughout the year, and there is hardly any doubt that BetMGM helped soften the blow. While casinos remained shut down or near-empty compared to 2019, online gambling saw a boom in the number of users both in the US and worldwide. In the United States, BetMGM is expanding quickly and is now operating in eight states, with Iowa being the latest addition to the list. BetMGM debuted in the Hawkeye State on January 4 this year.