Entain which is the owner of UK online and retail sportsbook giant Ladbrokes, rejected this week an $11 billion (£8.1 billion) takeover attempt made by U.S. casino operator MGM Resorts.
Entain said that the offer made by MGM, one of the biggest gambling and hospitality companies in the US, significantly undervalued the potential and prospects of Ladbrokes, which is one of the largest, most dominant sports books in the UK across both brick and mortar betting shops and online and mobile gambling sites and apps.
In the U.S., the Entain and MGM have partnered and are jointly operating U.S. facing brands including BetMGM, Borgata and PartyCasino.
Entain sees in Ladbrokes untapped potential to expand into international markets. Especially given the legalization of U.S. land-based and online sports betting which is expanding rapidly across US states. Adding even more perceived value, the COVID-19 pandemic has driven many deals across the gambling sector. For online sports books, casino and poker, potential buyers aim to capitalize on a surge in online betting by customers kept at home by lockdowns.
Entain owns more than 3,300 brick-and-mortar retail sports-betting locations including famous brands like Gala, Coral and Ladbrokes. In addition to the extensive revenues and market share the high-street brands generate from their online activities, Entain also owns and operates a large portfolio of online-only brands such as PartyPoker, PartyBingo, PartyCasino, Bwin and more. The London-based business operates in more than 20 countries and has over 24,000 employees across 5 continents.
Entain share price soared on Monday and closed up 25% at nearly $19.20 (£14.16). This made traders agree that the offered price was under par, and that MGM could increase its offer beyond the initial $18.75 (£13.83) per share. MGM made the move to take over Ladbrokes just a few months after its U.S. gambling rival Caesars Entertainment brought Ladbrokes’s UK rival William Hill for just under $4 billion (£2.9 billion).
After the U.S. Supreme Court legalized sports betting in America in 2018, a wave of international firms established their offices in the U.S. Many of these are British gambling technology providers and operators that are looking to use their expertise and operations from many years of operating freely in the UK and Europe while online gambling in the U.S. was banned.
However local state laws require them to do so in partnership with local operators that typically hold a state gambling license and land-based casino and other gambling venues. As such, casino and racetrack operators typically hold a limited number of licenses that are issued by each state.
This advantage that is provided to license holders leads analysts to say that U.S. casino investors are no longer willing to share profits, and are looking to buy out their British partners. Alum Bowden, Head of European Markets at American gambling consultancy Eilers & Krejcik Gaming believes that U.S. companies that are investing billions of dollars in buying UK knowledge and expertise makes perfect sense.
“The U.S. market is moving so fast, that spending two years at minimum building that [know-how and expertise] is time that nobody has to spend.” Bowden added, “American casinos, and everyone else underestimated the growth of the online gambling market and the impact on share prices. Two years back they were happy to form joint ventures and lease the brand [to European operators] for a share of the revenue. Now they really want full ownership and involvement in the market.”
Darin Oliver from gambling consultancy Simply Alpha Capital predicted back in 2018 that MGM would eventually buy Entain. But he also said that the MGM bid was undervalued. Oliver, who is the former Deputy Director of Licensing at the Alderney Gambling Commission, predicts that if a joint venture between MGM and Entain will float on the stock market it will be worth billions of dollars on its own.
In an interview to the press Oliver said: “The sports betting market in the U.S. is going crazy. There are limited entrants, the valuations are very high and there’s a belief that you need to move in early and capture your place.” Referring to the influence of the Coronavirus pandemic he said: “COVID didn’t have a serious impact because the market views it as a temporary thing that won’t have a long term effect. And even if it does, it’s most likely to increase online sports wagering and not reduce it.”
Days After Snubbing the MGM Bid, Entain Bids on Swedish Rival Enlabs
A few days after rejecting the MGM bid, Entain went on a shopping spree of its own. It offered to by Swedish-based sports betting firm Enlabs AB for $343 million. The offer of SEK40 for each share is a 1.1% premium on Enlabs’ Wednesday closing price of SEK39.55. Enlabs is mostly focused on the Baltic markets and operates brands such as Optibet and NinjaCasino for sports betting, casino and poker in these markets.
The Entain offer was approved by Enlabs’ board and is expected to be finalized on the first quarter of 2021. Niklas Braathen, Chairman of Enlabs said: When Entain’s interest to acquire Enlabs emerged, we saw strategic logic.” Referring to Entain’s global reach, he added: “Entain’s experience and track record in many different geographic markets, together with its market-leading proprietary technology and world-class marketing skills are key attractions for Enlabs as we look to grow in the Baltics and beyond.”
Entain CEO Shay Segev said: “The Acquisition of Enlabs is perfectly aligned with our strategy of expending across new regulated international markets.” This comes in line with Segev’s announcement in November of plans for the company to exit unregulated markets by 2023.
In addition, Entain raised on Thursday its annual core earnings forecast by around 7%. The new earnings are forecasted between £825 and £825 million (between nearly $1.19 and $1.145 billion).
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