MGM may wait before making new offer to Entain
If MGM Resorts International (NYSE: MGM ) is considering another takeover bid for Entain Plc (OTC: GMVHY ), it could take a while for that offer to surface.
That's the view from Jefferies analyst James Wheatcroft, who downgraded the Ladbrokes owner to "buy" from "buy" in a new note to clients. Hold,” while also lowering its price target on the gaming stock to £915 from £1,335. He also cut Entain's profit forecast through 2026 to better reflect the company's investment in BetMGM and higher interest costs.
Wheatcroft noted that there's a lot going on at MGM right now that suggests a short-term takeover bid for Entain may not come to fruition. Additionally, Coral's owner's stock price has plummeted recently, perhaps suggesting potential buyers don't need to rush into announcing an acquisition.
In January 2021, the Las Vegas-based gaming company made an $11.06 billion offer to its BetMGM partners, but Entain deemed the offer insufficient. There was speculation at the time that the Bellagio operator would increase its offer, but this never happened.
MGM's full offer could delay another Entain offer
MGM management has publicly expressed a desire to acquire the 50% stake in BetMGM that it does not currently own. Likewise, the company's executives have made it clear that another acquisition of Entain is not currently in sight.
At last month’s Global Gaming Expo (G2E) in Las Vegas, Entain CEO Jette Nygaard-Andersen told attendees The joint venture won’t last forever , perhaps suggesting that the day is coming when ownership of BetMGM will differ significantly from its current form.
As Wheatcroft noted, MGM has a lot on its plate right now, including overcoming a ransomware attack in September and the Las Vegas Grand Prix later this week. If the Formula 1 race represents a legitimate distraction from the takeover review, February's Super Bowl almost certainly does as well, suggesting it may be a while before MGM tries to factor it in again.
MGM uses capital in different ways
As Wheatcroft noted, while this isn't a disruption in the traditional sense, MGM recently launched a new $2 billion stock buyback program. This won't necessarily stop gaming companies from returning to Entain, as companies are not legally required to implement all announced stock buyback plans.
However, MGM has been a consistent buyer of its own stock, repurchasing $6.2 billion worth of stock from the beginning of 2021 through the end of the third quarter.
Whether this continues to be an obstacle for Entain to make a new offer remains to be seen. But given high interest rates, MGM may not want to resort to the debt markets to finance the Entain deal, and the company clearly has the means to deploy capital without investing heavily in its partner BetMGM.
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Source: www.casino.org
