DraftKings has made a bid to acquire UK-listed Entain in a bid valued at US$20bn.
Entain’s shares closed up 18 per cent following the DraftKings approach, as the move would give the DraftKings access to Ladbrokes and bwin online betting brands.
This is the second time this year a rival has sought to acquire the business and consolidate the fast-growing US market. Entain, which also owns brands such as Coral, PartyPoker and Sportingbet, had in January rejected an $11bn offer from MGM, saying it undervalued the company. Analysts also expect MGM to return with a new bid as it has accumulated more cash since its multi-billion-dollar offer.
DraftKings has proposed roughly £25 per share, representing a premium of about 30 per cent as of Entain’s Monday close, in a deal that will be largely funded by DraftKings stock along with a cash component.
“The offer almost doubles the bid made by MGM earlier this year, which was rejected by shareholders,” comments Harry Barnick, Senior Analyst at Third Bridge. “Entain is an attractive asset based on its experience in online gambling, where it is European leader in sports betting and online casino.”
“Draftkings audacious bid indicates it’s willingness to go head-to-head with Flutter owned FanDuel.”
“As shareholder’s mull over the deal, three key questions remain,” added Barnick. “What will happen to the MGM partnership under DraftKings ownership? Could we see a counter offer lead to a bidding war? Then with the wave of consolidation we are seeing in the market, including 888’s recent acquisition of William Hill’s international assets, investors’ will simply be wondering: which company could be targeted next next?”
Entain and MGM already have a joint venture, BetMGM, which controls 20+ per cent of the market versus DraftKings’ 15+ per cent. Any deal in which Entain will own a competing business in the US will require MGM’s consent.
MGM said: “MGM Resorts International is aware of DraftKings’ possible offer for Entain. MGM is Entain’s exclusive partner in the US online sports betting and iGaming market through our highly successful 50/50 joint venture BetMGM. As a consequence, any transaction whereby Entain or its affiliates would own a competing business in the US would require MGM’s consent. MGM’s priority is to ensure that BetMGM continues to capture the growing US online opportunity and realising MGM’s vision of becoming a premier global gaming entertainment company. MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”