The management of Entain plc has announced an offer of $11billion that was made to them by MGM, one of the casino giants in the USA. However, they added that they didn't accept the offer as they considered it an underbid. This move by MGM is like the one made by Caesar entertainment inc, where they acquired William Hill for a sum of £2.9 billion.
According to the proposal submitted by MGM as published in a Sunday edition of the wall street journal, MGM offered 0.6 shares on each of Entain shares at the value of 1,383p per share. This offer is a 22% increment to the value of Entain's close as of 31th of December 2020.
Why the Offer was Rejected
In response to this offer, Entain quickly rejected it and commented that the offer didn't represent a clear understanding of the value of their company and its prospect.
MGM had presented a cash offer of $10billion to Entain around the latter part of 2020, which they ended up rejecting. Like their rival casino powerhouse in the UK, Caesars Entertainment, which will soon acquire William Hill before the end of 2021 first quarter, MGM is looking to expand its business in the USA.
Caesar has obtained the necessary clearance from the US government that is required to seal the deal, and it is only waiting to get approval from the gambling regulators in different states.
The most significant shareholders at MGM are entirely in support of the acquisition of Entain. The Management of Entain has asked for more information on how a strategic combination of both companies could be a strategic move towards their growth. If Entain had accepted the offer, her shareholders would have owned a 41.5% share of the new group.
Previous Deal with MGM
In 2018, Entain had entered into a joint venture of $200million with MGM. At around the time when the Supreme court lifted the ban that was initially placed on sports betting. This move by the court made over 24 states also move on to legalize sports betting within their jurisdiction.
The joint venture is known as ROAT digital, and it is responsible for running the BetMGM mobile casino app. The investment in the business increased to $450million last year.
The Main Shareholders
InterActiveCorp(IAC) is MGM's biggest shareholder, and they have pledged their support over the acquisition of Entain. This USA media giant has expressed a willingness to inject an additional $1billion into the acquisition of Entain. This is besides the $1billion they invested in boosting MGM digital gambling earlier on.
Until its recent rebranding, Entain was formerly known as GVC Holdings. According to their planning and projections, Entain seeks to leave all unregulated markets by the end of 2023 and stick to regulated territories.
Entain's service used to be limited to the online gambling space before 2018 before they acquired Ladbrokes Coral. Entain currently owns many digital casinos and betting brands such as BetMGM, partypoker, and Bwin. In addition to those, it owns a good number of retail bet shops across the UK.