MGM Resorts offers to acquire Entain

Simona Boshkova | Published 5 Jan 2021, 9:21 a.m.

The casino industry has significantly grown in the past few months, despite all the challenges of 2020. Last week, we have reported that Aspire Global expanded its operations in Latin America, after forming a partnership with William Hill. Moreover, one of the biggest mergers that happened last year came from Caesars Entertainment, which bought William Hill in £2.9 billion acquisition deal

Now, as we turn to a new year, the mergers and the expansion of the casino industry continue. A new merger seems to be on its way and it is between MGM Resorts and Entain, a company formerly known as GVC Holdings. As it was announced, MGM Resorts made an offer of £8.1 billion to acquire Entain. Entain confirmed that it has received the offer but said that the offer "significantly undervalues" the company's shares and its prospects.

A bid of 22% over the share price

Entain plc, formerly known as GVC Holdings, is a British sports betting and gambling company. In order to focus its efforts on long-term growth in regulated gambling markets, it has announced its rebranding back in November. The company owns many well-established brands including Ladbrokes, Coral, Foxy Bingo, Party Poker, Bwin, Gala, and Sportingbet. Entain helped MGM Resorts start its sports gambling operations when the two companies partnered to launch BetMGM. And as you probably know, BetMGM has seen huge growth and has recently launched live casino in New Jersey.

While Entain helped MGM to expand, it seems like MGM Resorts is ready to take over Entain completely. As it was announced yesterday, MGM Resorts International made an offer of £8.1 billion to acquire Entain. The most recent proposal saw MGM Resorts offer 0.6 of its own shares for each Entain share. Based on the closing price on 31 December 2020, each Entain share is valued at a price of 1,383 pence, plus a premium of 22%, valuing the business at around £8 billion. In addition, Entertain shareholders would then hold ownership of approximately 41.5% of the enlarged MGM Resorts. MGM also said that a limited partial cash alternative would be made available to Entain shareholders.

Entain responds to MGM Resorts approach

Yesterday, Entain confirmed that it has received the proposal from MGM Resorts. However, the company added that it believed the proposal, which represents a bid of 22% over its closing price of December 31, “significantly undervalues” the company and its prospects. The Entain board has also asked MGM to provide additional information in terms of the strategic rationale for a combination of the two companies. According to the UK’s City Code on Takeovers and Mergers, MGM Resorts has until the 1st February to make an improved formal offer or withdraw their interest.

In their response, Entain said that the company has received multiple proposals from MGM. For that reason, many analysts believe that MGM will come back with an improved offer. Across 2020, shares in Entain increased by around 25%, so it’s not a surprise that the company would reject the £8.1 billion offer. What’s more, Entain knows its potential and is aware of the success of BetMGM, which operates in 10 states. Therefore, it’s up to see whether MGM will improve its proposal and will make one of the first mergers in the new year.