Ladbrokes owner’s shares leap after it rejects £8.1bn MGM bid
The gambling company behind Ladbrokes and Coral has rebuffed an £8.1bn takeover proposal from its US partner, MGM Resorts, as the arrival of legal sports betting in the US continues to fuel transatlantic dealmaking.
Entain said the offer from MGM, the owner of the Bellagio casino in Las Vegas, significantly undervalued the company and its prospects.
Shares in Entain, which owns a host of online betting brands and more than 3,300 high street bookmakers, closed up 25% at £14.16 on Monday, suggesting traders think MGM could increase its offer beyond the £13.83 bid on the table.
MGM swooped for Entain just a few months after the US operator’s rival Caesars Entertainment bought William Hill for £2.9bn, underscoring the appetite for UK firms’ technology and experience in the newly regulated US gambling market.
Since the US supreme court legalised sports betting in 2018, a flurry of British firms have established beachheads in the US, exploiting expertise gleaned from years of operating freely in the UK.
But state laws have required them to do so in partnership with local US casino operators that typically hold the limited number of sports wagering licences to be awarded.
Analysts said US casino investors were no longer happy to share the spoils and were looking to buy out their British partners instead.
Alun Bowden, the head of European markets at the US-based gambling consultancy Eilers & Krejcik Gaming, said it made sense to spend billions on knowhow that UK firms already possessed.
“The US market is moving so quickly that to spend one or two years building that up, at the absolute minimum, is just time nobody has to spend,” he said. “The casino firms probably underestimated the growth of both the online gambling market there and the impact on share prices. I think everyone did.
“Two years ago they were happy to do joint ventures and effectively lease the brand for a revenue share deal to European operators. Now they really want to have full ownership of their involvement in the market.”
Entain, which was known as GVC until shareholders voted for a name change last month, started a 50/50 joint venture, BetMGM, with MGM in 2018, offering online sports betting and casino games in the growing number of US states where it is legal.
Before the supreme court overturned the ban on sports betting, Nevada – home to Las Vegas – was the only state where it was allowed. A further 18 states have joined Nevada, and more are either expected to follow suit or are already doing so. The California market alone is thought to be worth more than the UK’s.
Darin Oliver, the managing director of the gambling advisory business Simply Alpha Capital and a former deputy director of licensing at the Alderney gambling control commission, predicted in 2018 that MGM would eventually buy Entain.
He agreed that MGM’s bid undervalued Entain and suggested the joint venture could eventually be hived off and would be worth “billions of dollars” alone if it were floated on the stock market.
“The sports betting market in the US is going crazy,” he said. “There are limited entrants, the valuations are very high and there’s a belief that you need to get in early and establish spots.
“Covid hasn’t been a drag because the market sees it as being a temporary thing that won’t have an impact on behaviours. If it does, it’s most likely to increase online sports wagering than reduce it.”
Oliver said some other British or European firms were less exciting targets for a highly regulated US firm because they still operated in so-called “grey markets”, territories where gambling is not legal.
Entain “is perfect for a US gambling operator to acquire since it’s likely to not have any dirty laundry in it. It’s the last man standing in that department,” he added.
Under UK takeover law MGM has until 1 February to either announce its firm intention to make an offer or to withdraw. MGM Resorts was approached for comment.