Potential Issues for Entain may Prompt MGM to Reconsider a Takeover Attempt
Entain Plc (OTC: GMVHY), a gaming company, faced a decline in market capitalization after issuing a less-than-impressive 2023 net gaming revenue (NGR) forecast on Monday. This could make the company a possible target for a takeover offer from MGM Resorts International (NYSE: MGM).
The rebound on Tuesday wasn't enough to regain the loss, and at the end of the US market hours, Entain's market capitalization was only $7.16 billion. This is considerably lower compared to MGM's valuation of $12.93 billion.
The recent downturn also wiped out almost all of the gains made by Entain's shares due to the COVID-19 pandemic, suggesting that MGM might receive a more favorable response if they were to make another bid for their BetMGM partner. This is just conjecture for now.
In early 2021, MGM proposed acquiring Entain for $11.06 billion, a deal that Entain refused, claiming the offer was inadequate. It was rumored at the time that MGM would increase their offer, but these rumors were just speculation.
MGM's current negotiations position may allow them to execute an acquisition while providing a substantial premium by paying less than the January 2021 offer.
Current Situation between MGM and Entain
Both MGM and Entain can be easily described regarding their relationship. They are 50/50 partners in BetMGM, a prominent US online sportsbook and iGaming operator. BetMGM is anticipating profitability in the second half of 2023.
MGM has expressed its desire to take full control over BetMGM, but CEO Bill Hornbuckle said earlier this year that it's unlikely they would offer a new bid for Entain. As for Entain, they are presently grappling with regulatory issues in the UK and slow growth in Australia and Italy.
Since October 2021, Entain's shares have lost half their value. Despite this, the current situation presents an opportunity for Hornbuckle, who would prefer more control over the U.S. sports-betting joint venture he shares with Entain, according to Reuters.
Previous speculations have hinted at MGM buying out Entain's stake in the BetMGM partnership - an option that would be more financially viable than an outright takeover. However, an official proposal for this transaction has not been made. It's unclear whether Entain would approve such a buyout.
Market Vulnerabilities for Entain
Some shareholders were concerned that Entain's mistakes, such as the acquisition of a Polish sportsbook operator, could pave the way for unwanted takeover bids from companies like MGM or others. Eminence Capital CEO and CIO Ricky Sandler was among these investors who issued a warning in June, prior to the revenue forecast being published on Monday, warns that Entain's erroneous decision could attract unwanted acquisition offers.
Sandler's hedge fund is a significant Entain investor, and some shareholders may wish that Entain had accepted the $11.06 billion bid from MGM in 2021. It's important to note that MGM later received offers from DraftKings (NASDAQ: DKNG) worth over $20 billion and reportedly a $22 billion offer. The average of these figures is double Entain's current market value.
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Source: www.casino.org
