Takeover proposal

Entain offers details of $22.4B DraftKings bid, US partner MGM responds

MGM and Entain, which owns several popular brands including Ladbrokes, have now issued statements in regards to DraftKings proposal.
United States
Reading time 2:35 min
Following confirmation of a DraftKings proposal to acquire its assets, Entain has now issued a new statement detailing the offer. Entain's US partner MGM said any deal involving their joint venture BetMGM would require its approval. DraftKings could seek to sell Entain's 50% stake in the BetMGM joint venture to MGM, or alternatively merge with BetMGM while giving MGM a stake in the new company. Moreover, MGM could counter with its own proposal.

Following reports earlier this week of a $20 billion-plus takeover proposal from DraftKings, now Entain, and its US partner MGM, have issued responses confirming the offer and providing further details of the suggested deal.

While Entain initially corroborated the proposal in a filing with the London Stock Exchange yesterday, the price of the offer was not revealed. Now, a new statement, issued on Wednesday, further details the proposal.

The Board of Entain confirms that following an earlier approach from DraftKings at 2,500 pence per share (the consideration of which comprised of a combination of DraftKings shares and cash) which was rejected, a further proposal was received on 19 September 2021,” says the press release.

Under the terms of this latest proposal, DraftKings would offer 2,800 pence per Entain share, consisting of 630 pence in cash and the balance payable in new DraftKings Class A common shares.

Entain further revealed that DraftKings proposed that the exchange ratio, which would deliver the share element of the 2,800 pence per Entain share, was to be fixed immediately prior to the first agreed public announcement. 2,800 pence per Entain share represented a premium of 46.2% to Entain’s closing share price on September 20, 2021.

The statement further says that the Board of Entain “will carefully consider” the proposal and a further announcement will be made “as and when appropriate”. Shareholders of the company are urged to take no action at this time.

Following news of the takeover proposal, which would equate to $22.4 billion, Entain’s shares jumped to a record high on Wednesday, reports Reuters. The company, which owns betting shops Ladbrokes and Coral and online brands bwin and partypoker, saw its shares rising as much as 11% to hit 25 pounds.

MGM, which has a joint venture with Entain in the US under the BetMGM brand, also issued its own statement, as any deal involving Entain’s assets in said country would require its approval.

“Any transaction whereby Entain or its affiliates would own a competing business in the U.S. would require MGM’s consent,” stated MGM. “MGM’s priority is to ensure that BetMGM continues to capture the growing U.S. online opportunity and realizing MGM’s vision of becoming a premier global gaming entertainment company.”

The company further stated it would engage with Entain and DraftKings to find a solution to the exclusivity arrangements “which meets all parties’ objectives.”

In order to earn MGM’s approval, DraftKings would have to sell Entain’s 50% stake in the BetMGM joint venture to MGM, according to analysts, leaving DraftKings with Entain’s rest-of-the-world operations.

Alternatively, DraftKings could seek to merge with BetMGM, giving MGM a stake in the new company, experts told Reuters. However, this deal would have to be attractive enough for MGM to “give up its desire to have control.”

Another question now opened is whether MGM will counter with its own proposal. Earlier this year, the company made an $11 billion offer to Entain, which was rejected as the UK group considered it as significantly undervaluing its assets. MGM might now return with a new bid, as it has now accumulated more cash since then.

American gambling companies have been targeting European operators these last months in an effort to exploit the US’ expanding sports betting market. In April, Caesars Entertainment announced the completion of a $4 billion acquisition of William Hill. Earlier this month, Caesars agreed to sell Hill’s non-US assets in a $3 billion deal.

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