MGM wants to buy Ladbrokes owner Entain

MGM Resorts International MGM 1.03%

wants to buy British gambling company Entain ENT -1.56%

According to the people familiar with PLC, in the latest move by a casino operator, PLC has doubled the red-hot online gambling industry.

MGM recently made an offer to buy the owner of the British gambling brand Ladbrokes, which has a market value of about $ 9 billion. The offer, which would have a significant inventory component, comes after an earlier amount of about $ 10 billion in cash was turned down. The new bid comes with financial support from MGM’s largest shareholder, IAC / InterActiveCorp.

IAC 1.00%

said the people.

The exact details and value of the new bid could not be learned, but it is higher than £ 12.85 – or $ 17.56 at current exchange rates – a share that MGM offered late last year, people said. There is no guarantee that Entain is receptive to the new offer or that there will be an agreement.

A combination can create one of the few major gaming companies in the world with a significant online and brick-and-mortar presence. This will follow other recent consolidations in the industry.

Like its peers, MGM was under pressure because the coronavirus pandemic closed its biggest money-makers – casinos and hotels on the Las Vegas Strip – or spent much of the year operating at a sharply reduced capacity.

The online games market, meanwhile, was already booming before the pandemic gave it an extra boost. This has prompted casino operators such as MGM to turn their businesses around even faster than planned, often through partnerships and acquisitions.

MGM currently derives a small portion of its revenue from online betting, which casinos have long considered a threat but increasingly seen as an opportunity as people distance themselves socially at home, and the pandemic keeps gamblers away from slot machines and blackjack tables. The trend towards online gambling is not expected to reverse any time soon.

Entain, which until recently was known as GVC Holdings, is one of the largest gambling companies in the UK after concluding a $ 5 billion deal that put Ladbrokes under its roof in 2018. Shares rose recently as the pandemic could bring the online center into play. The MGM-based MGM has a market value of approximately $ 16 billion and is best known for its casino properties that include the Bellagio and Mirage.

Barry Diller’s Internet conglomerate IAC became MGM’s largest shareholder in August, declaring a stake of about 12% valued at about $ 1 billion. It said at the time that it planned to partner with the company to expand its online gambling industry. Diller, chairman of the IAC and Joey Levin, also joined MGM’s board.

Another of its top shareholders, Corvex Management MP, also has a seat on the board owned by Keith Meister, the founder of the activist hedge fund.

Caesars Entertainment Inc.

CZR 0.79%

recently entered into a $ 4 billion deal to buy William Hill WMH in the UK 0.30%

PLC, which already has a joint venture with the MGM competitor. Caesars’ shareholders hailed the deal, with its shares ending the year at about 25%. The deal is expected to close in March.

Investors, meanwhile, are piling on companies with the potential to be key players in the growing online gaming market, particularly in US share prices of DraftKings. Inc.

DKNG -4.88%

and Penn National Gaming Inc.,

PENN -0.83%

increased by almost 340% and 240% in 2020, for example.

DraftKings was announced in April through a deal with a blank check company and a merger with a small provider of gambling technology at the same time. Penn National took a significant stake in finely owned Barstool Sports Inc. in early 2020 in an agreement that gave it exclusive rights to use the media company’s brand in its sports betting products.

MGM’s shares declined about 5% this year while Entain closed up about 30%, possibly in a blink of an eye to its potential takeover target.

The management teams of MGM and Entain have existing ties. Since 2018, they have become exclusive partners of BetMGM, a small but growing online gaming company that recently also funded both parties. BetMGM, which uses Entain’s technology and MGM’s licenses and trademarks, operates in more than ten states, including Nevada, New Jersey and Indiana. It plans to be more than 20 by the end of 20.

Write to Cara Lombardo by [email protected]

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