It may sound confusing at first, but you be the judge.
In 2018, Vegas-based MGM Resorts International and U.K.-based Entain Plc—formerly GVC—went halfsies on a sportsbook dubbed BetMGM. The sportsbook and its companion online casino have done well in a crowded field.
Now another sportsbook, DraftKings, has reportedly offered more than $20 billion to buy Entain. The offer is a mix of cash and stocks, mostly the latter. The offer eclipses the $18 billion value of Entain, according to CNBC.
If the offer goes through—and that’s a big if—Entain and DraftKings might live happily ever after, but for one nagging thorn. MGM still owns half of BetMGM.
Is this making any more sense?
Just speculating, but one avenue for MGM Resorts could be to offer more than $20 billion to acquire Entain. The company pitched $11 billion to Entain in an offer that was roundly rejected. You can see why now. According to SBC News Entain Chairman Barry Gibson said the offer “significantly undervalued the company’s future growth prospects.”
One thing is certain. MGM isn’t going to roll over while DraftKings flexes its muscle. Here’s what the company said in a statement:
“MGM is Entain’s exclusive partner in the U.S. online sports betting and iGaming market through our highly successful 50/50 joint venture BetMGM LLC. As a consequence, any transaction whereby Entain or its affiliates would own a competing business in the U.S. would require MGM’s consent. MGM’s priority is to ensure that BetMGM continues to capture the growing online opportunity.”
Truth be told, MGM wants a controlling interest, not halfsies. BetMGM generated net gaming revenue of $357 million in the first six months of 2021. The sportsbook is projected to rake in more than $1 billion in revenue next year.
After an initial slow start, BetMGM has emerged as a significant player. In June, it was the third-largest operator in sports betting in the U.S., after FanDuel and DraftKings, and No. 1 in online casino games, according to the research firm Eilers & Krejcik.
“MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives,” the gaming company said.
As recently reported by Inside Asian Gaming, MGM has also flagged a global vision for BetMGM as part of its long-term expansion plans.
“We could see this as a positive for MGM if they walk away owning 100 percent of BetMGM,” said Barry Jonas, an analyst with Truist Securities.
As of last week, DraftKings had no comment on its reported bid. The sportsbook has until October 19 to confirm if it will make an offer, Jonas said.
DraftKings could end up with Entain’s non-U.S. businesses, which would fill its coffers, including proceeds for Entain’s sale of its share of BetMGM, according to CDC Gaming Reports. “It would accelerate a move to profitability, helping fund growth with international cash flow,” Jonas said.
“We have indicated that MGM could make another bid for Entain, especially as the company has meaningfully improved its capital structure,” Jefferies’ analyst David Katz said. “We believe Entain is an attractive takeout target, given its strong track record and growth profile, as well as its proprietary tech stack.”
What happens if the deal does go through? DraftKings and MGM would be partners in BetMGM.
“Given the joint venture between Entain and MGM, the acquisition of Entain by DraftKings or another party raises the matter of how the joint venture is aligned going forward,” Katz said.
If the transaction were to occur, Katz asked, what might be the response of other players such as FanDuel, Caesars Entertainment, Penn National and Hard Rock?
“We are already seeing Penn broadening its purview through the acquisition of Score Media and Gaming,” Katz said. “Is the focus continuing on gaining more market share or technological capabilities? One could argue both in acquiring Entain, but whether others are positioned with leading technology and content to win and maintain leading share over time remains an open debate.”
Brendan Bussmann, director of government affairs for consulting firm Global Market Advisors, said DraftKings and MGM may have different views on how to deal with a sportsbook.
“I would be hard-pressed to see something like this going through for a couple of reasons,” Bussmann said. “Number one, you have two giants (MGM and DraftKings) who don’t necessarily see eye to eye on how they address sports betting. And number two, you probably have some regulatory hurdles because of market share. You would have to have regulatory approval within states where they operate and SEC approval at some point.”
Last Tuesday, Jonas said it would be “a positive” for MGM if it ends up owning 100 percent. “While MGM could still offer a competing bid for all of Entain, we think it makes more sense for them to just buy Entain’s 50 percent share of BetMGM. MGM owning all of its online business would be a clear long-term positive, in our view, though price would obviously be an important factor.”