U.S. gaming giant MGM Resorts International announced on Monday that it has been granted all regulatory and government approvals needed to complete its acquisition of Swedish gaming company and online sports betting operator LeoVegas.
“All other conditions specified in the Offer Document, including conditions for completion of the Offer, still apply,” MGM said in a press release. “As previously announced, the acceptance period for the Offer expires on 30 August 2022. Settlement for shares tendered in the Offer will take place as soon as MGM announces that the conditions for the Offer are fulfilled or if MGM otherwise decides to complete the Offer.”
The news comes a little more than three months after MGM announced its approximately $607-million takeover bid on May 2 for Stockholm-headquartered LeoVegas, with the former calling it a "unique opportunity for the company to create a scaled global online gambling business."
Based in Las Vegas, where it famously operates the Bellagio and other hotels and casinos, MGM Resorts expects to complete the all-cash transaction by September 7 after the share tender offer acceptance period expires.
MGM is paying $6.20 a share for LeoVegas (or 61 Swedish krona per share), which represented a 44% premium on LeoVegas’ closing stock price on April 29, the last trading day before the takeover bid was announced.
Going global
In acquiring LeoVegas, MGM is making what most analysts believe to be an astute deal. The casino owner and sports betting operator is aiming to add a highly visible brand in Europe and Scandinavia to its existing mobile sportsbook in the United States, BetMGM, in which MGM holds a 50% stake. Entain PLC owns the other half of BetMGM.
MGM Resorts CEO and President Bill Hornbuckle believes that LeoVegas is a "small" but "great place to start" as part of its ongoing M&A strategy.
"We are interested (in) and want (the) rest of the world," Hornbuckle said during an August 3 earnings call. "We're probably going to be in at just under $600 million, hopefully throw off between $40 million and $50 million the first year."
The Swedish outfit is a popular overseas sportsbook and its platforms include leovegas.com, slotboss.co.uk, pinkcasino.co.uk, betuk.com, 21.co.uk, and royalpanda.com.
And, by incorporating LeoVegas' eight gaming licenses across the continent, MGM Resorts is extending its global presence. LeoVegas was also one of the first operators to relaunch in the newly regulated market for online casino gaming and sports betting in Ontario in April. BetMGM is also part of that market.
"[LeoVegas has] an expandable platform,” Hornbuckle added. “It's got a built-in team that we really like in terms of its management. And so we're looking at M&A, we're looking at gaming studios. They have dabbled in before live dealer, live gaming. And so we like the entry.
"It's in Canada as well. So it's an open marketplace, obviously, for BetMGM, LeoVegas and our partners at Entain as well. And so we just like the exposure it gives us. It's a learning curve for us to understand the rest of the world, and we think we'll learn a lot from [LeoVegas]."
Cash cow
LeoVegas is also a modest cash cow that runs a profitable European online gaming operation, with revenue of $414.2 million for the year ended March 31, 2022, and EBITDA earnings (before interest, taxes, depreciation, and amortization) of $50.6 million (based on current exchange rates). This gives the company unique status among sportsbook operators, especially those in the U.S., where marketing costs have helped keep most operators in the red.
This also made LeoVegas an inviting takeover target for MGM Resorts, which must still finance operating losses at BetMGM that reportedly will linger until 2023. The parent company was obliged to cover $35.5 million in BetMGM losses in Q2 and estimates that its total 2022 liability for its subsidiary will reach $225 million.
For its part, LeoVegas CEO Gustaf Hagman believes that the deal is good for both companies:
"I see huge potential in what LeoVegas and MGM could achieve together," Hagman said at the time of the friendly takeover bid. "MGM Resorts have been working on creating the best offline casino experience for a long time, and we’ve done the same for the online experience. Merging the two is a very exciting prospect."
Concerns eased?
The announcement that MGM Resorts had obtained regulatory approval for the acquisition could ease concerns connected to an investigation into suspected insider trading in the LeoVegas shares, which came to light in June.
What’s more, LeoVegas was handed an approximately $1.6-million penalty by the U.K. Gambling Commission earlier this month for not adhering to anti-money laundering rules. The operator was subject to a similar fine in Denmark last October.
In the end, however, MGM Resorts is moving forward in the deal as it aims to become a major operator in Europe.
