ollowing Entain's announcement that the £8.1 billion ($11.1 billion) takeover proposal made by MGM Resorts International to its joint-venture partner Entain (formerly known as GVC) "undervalues" the business, MGM issued a statement confirming the proposal and clarifying some topics.
Ladbrokes owner Entain said in a statement Monday that it believed the offer, which represents a 22% premium over its closing price on December 31, "significantly undervalues" the company's shares and its prospects.
In response, MGM stated that the company is aware of the announcement made by its partner in the U.S. sports betting and iGaming market and confirmed that it has proposed an offer of 0.6 MGM shares for each Entain share, which, based on closing prices on December 31, 2020, represents a value of 1,383 pence per Entain share and a premium of 22% to Entain's share price.
Under the terms of the proposal, Entain shareholders would own approximately 41.5% of the combined company. MGM has also indicated that a partial cash alternative could also be made available to Entain shareholders. In addition, IAC, the company's largest shareholder, has indicated it would potentially fund a portion of the partial cash alternative through a further investment in MGM.
The Board of Entain has stated that it believes the proposal undervalues Entain but has also asked the Company to provide additional information in respect of the strategic rationale for a combination of the two companies. MGM believes both its proposal and the strategic rationale for the combination are compelling and looks forward to engaging with Entain on this basis. In particular, the Company believes that a combination with Entain would:
There can be no certainty that any offer will be made for Entain, MGM said in the statement.
Furthermore, MGM stated that in accordance with Rule 2.5 of the UK's City Code on Takeovers and Mergers, the company reserves the right to "vary the form and/or mix of the consideration described in this announcement; and make the offer on less favorable terms with the recommendation or consent of the Board of Entain, if Entain announces, declares or pays any dividend or any other distribution to shareholders, in which case the Company will have the right to make an equivalent reduction to the proposed price; if a third party announces a firm intention to make an offer for Entain on less favorable terms than its proposal; or following the announcement by Entain of a whitewash transaction pursuant to the Code."
Finally, MGM stated that "it does not intend to comment further on this or other rumors or speculation."