MGM Resorts is seemingly preparing a new bid to acquire British legal sports betting company Entain Plc. — the owner of UK brick-and-mortar bookmakers Ladbrokes and Coral.
News of the imminent takeover attempt has spread like wildfire across both sides of the Atlantic following last Thursday's report by the American corporate finance news group, CTFN, later reported by Financial Mail on Sunday, that MGM's bid for the UK operator is "inevitable."
Most gaming industry analysts believe that the release of the long-delayed UK Gambling Act white paper — now expected to arrive in March — will be the trigger for MGM to launch a buyout once new regulations for the UK gaming industry are spelled out in detail, thereby providing MGM with greater clarity as to the territory's new operating environment.
The acquisition of Entain would give MGM Resorts, the largest operator of casinos on the Las Vegas strip including the Bellagio and Cosmopolitan, full control of its BetMGM sportsbook, a joint venture with Entain in which each owns an equal 50% stake.
BetMGM is currently on course to enter profitability, possibly as early as the first quarter of 2023, and ranks third behind FanDuel and DraftKings in terms of market share in the U.S. legal sports betting market.
This makes it a prize possession in the eyes of MGM Resorts which reportedly "instantly regretted" its decision to launch the BetMGM sportsbook as a 50-50 partnership with Entain rather than as a wholly-owned entity.
Entain also owns valuable sportsbook licenses in several dozen territories around the world which would fit squarely into MGM Resorts' avowed ambitions of becoming a major player in the global gaming industry.
Last year, MGM completed a $607 million all-cash purchase of LeoVegas, the Stockholm-based gaming company and online sports betting site operator.
MGM Resorts CEO and President Bill Hornbuckle described LeoVegas as "small" but "great place to start" in terms of its ongoing M&A strategy that viewed the acquisition as an initial foray into creating "a scaled global online gambling business."
Another kick at the can
The impending bid for Entain would mark the second time that MGM Resorts had tried to acquire the British operator. In January 2021, Entain, led by its Danish CEO Jette Nygaard-Andersen, rejected an all-stock offer from MGM — worth an equivalent value of nearly $11 billion — as being far too low.
Later in October of that same year, Entain's board of directors similarly turned down a much more generous $22 billion cash and stock offer from the mega U.S. sportsbook DraftKings which ultimately walked away from the table after negotiations stalled.
But now it would appear that MGM Resorts is hoping that the consensus forecast of a major recession in the UK economy in 2023 will make Entain more vulnerable to a takeover in the wake of a softer gaming environment.
Entain is also a cheaper target in the wake of the recent decline in the value of the British pound relative to the U.S. dollar, which has seen it fall from $1.35 at the beginning of 2022 to its current value of $1.24, a 10% decline. At the time of MGM's previous bid, pound sterling was trading in the $1.36 range.
Last year's weakness in the UK economy has seen Entain shares fall from its September 2021 5-year high of just over 2200 GBX to its current value of 1520 as of the close of trading on Tuesday, a decline of 31%.
However, rumors of a possible takeover attempt by MGM have seen Entain shares jump by 12% since the beginning of 2023, a signal that financial markets are taking the rumors very seriously.
A brief report put out by Deutsche Bank analysts last week stated that the deal represented a "fairly obvious combination" and that Entain shareholders would be more amenable to approving a takeover offer were it to contain a more balanced proportion of cash to MGM shares than the company's previous all-stock January 2021 bid.