Analyst Predicts Entain to Continue Acquisitions in Eastern Europe
Entain Plc (OTC: GMVHY), recently announced the acquisition of Poland's STS Group, has positioned itself for further expansion in Eastern Europe according to Third Bridge analyst Lara Martinez. The Coral owner is seeking to diversify its revenue growth, which is heavily dependent on the US market through its 50% stake in BetMGM.
Martinez highlights Entain's growing presence in Central and Eastern Europe through mergers and acquisitions, but warns that a large majority of the company's revenue and growth come from the US. Entain has been on a buying spree for the past two years, acquiring smaller gaming companies like STS and SuperSport Group in Croatia.
Eastern Europe's market maturity is one reason attracting deal-hungry operators, with countries in the region largely untapped due to their lack of development compared to the UK, Germany, or Italy. This creates an opportunity for Entain to boost its market share in Europe. Other large sportsbook operators and private equity firms may focus on established markets, leaving Central and Eastern European markets less competitive.
Moreover, some jurisdictions in Central and Eastern Europe lack online wagering regulations but are soon anticipated to introduce them, making these markets more enticing to international operators. Potential targets for Entain include Romania, the Czech Republic, Slovakia, Poland, and Croatia, as well as Hungary and Bulgaria where online gambling is predicted to be regulated soon.
Although most of Entain's recent acquisitions have been cost-effective and relatively small, the Ladbrokes owner recently faced criticism from one major investor, Eminence Capital. Rickey Sandler was dissatisfied with Entain's decision to issue shares to fund the $750 million buyout of STS, Poland's largest sportsbook operator. Sandler argued that selling equity to pay for STS dilutes current shareholders and lessens the earnings per share benefit of the transaction.
He also opined that Entain's stock price drop in reaction to the share sale indicated it could entice unwanted takeover bids from companies like MGM Resorts International (NYSE: MGM), a possible attempt to gain full control of BetMGM. However, MGM has not yet expressed a particular interest in acquiring Entain despite previously attempting to do so in early 2021.
For now, such an acquisition remains speculation, as MGM has not publicly disclosed a new offer since the early 2021 attempts. MGM's aim to have complete control of BetMGM is widely known, and it possesses the financial strength to potentially make an attractive offer for Entain.
Entain underlined Eastern Europe's potential as a strategic area for growth, following its acquisition of STS Group, with the company's sights set on expanding its market share in central and eastern European regulated markets. This reflects a strategy to mitigate its reliance on the US market through its 50% stake in BetMGM.
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Source: www.casino.org
