Entain could sell BetMGM stake or itself to MGM, Jefferies analysts say
Given the recent departure of CEO Jette Nygaard-Andersen and growing activist investor action against the stock, it may be time for Entain Plc (OTC: GMVHF ) to consider major action .
That's the view of Jefferies analyst James Wheatcroft. In a new note to clients, he gave Ladbrokes' parent company's stressed shares a "buy" rating, rather than a "hold" rating, and suggested the gaming company could consider a number of options.
We expect that in addition to finding the right CEO, other options include selling Entain to MGM, selling BetMGM shares, selling other assets... There are now several factors that indicate "this is a good choice" ". It’s time to refocus on MGM – and evaluate Entain’s approach,” Wheatcroft wrote.
Nearly three years after the Bellagio operator paid $11.06 billion in cash and stock for Entain, MGM Resorts International (NYSE: MGM ) will renew its bid for its BetMGM partner . British bookmakers said the offer was unreasonable. In the nearly three years since the offer, MGM has not made another public offering, and Entain's market value has fallen to $7.89 billion.
Why Jefferies analysts are bullish on Entain
Wheatcroft acknowledged that the specter of a transformative deal - whether divesting Entain's 50% stake in BetMGM or selling the entire company outright - could hamper the search for a new chief executive. He still thinks it's highly unlikely that "an extremely credible CEO will end up joining Entain."
That search could be aided by expectations that Eminence Capital founder Ricky Sandler will soon be appointed to the gaming company's board of directors. Other activist investors have urged Entain to add Sandler to the board and give him a major role in filling other open director positions. He is likely to have a significant say in the CEO selection process.
Wheatcroft also highlighted Keith Meister's Corvex Management's recently announced 4.4% stake in Entain as a potential deal catalyst. Meister is not a candidate for a seat on Entain's board of directors due to a potential conflict of interest.
Still, Wheatcroft's idea makes sense because Mester is a director at MGM and his hedge fund owns 2% of the casino giant's outstanding stock. This means that if MGM were to acquire Entain outright or gain full control of BetMGM, he would likely come out on top.
believe it when it happens
Given the executive turmoil and rising activist investor interest in Entain, now seems like the right time for MGM to pounce. But by financial market standards, speculation in this direction is now outdated.
By contrast, MGM executives remained firm on two issues. First, they want complete control over BetMGM. Second, another direct acquisition of Entain is unlikely in the near future. At least that's what the public says.
Still, as Wheatcroft points out, Entain's stock price is still cheap right now, even considering recent headlines suggesting the company could be a takeover target.
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Source: www.casino.org
