MGM’s $11 Billion Acquisition Offer Rejected by British Gambling Company Entain

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Gambling company Entain Plc has dismissed an 8.1 billion-pound ($11.1 billion) takeover attempt from MGM Resorts International saying the bid undervalues the U.K. company that’s benefiting from a surge in online betting.

Under the proposed terms, Entain investors would exchange stock for 0.6 of a share of MGM and would hold about 42% of the combined business, the London-listed company said in a statement Monday. That tops an earlier all-cash bid made late last year, people familiar with the matter had said.

A merger would give MGM full control of its U.S. joint venture with Entain at a time when the industry is seeing dramatic growth and would “expand and diversify the company’s operations, product offerings and earnings,” the U.S. company said in a separate statement. The U.S. sports betting market alone is expected to quintuple in size to $8.4 billion by 2024, according to the consulting firm Vixio Gambling Compliance.

MGM may also offer a “limited partial cash alternative” to the British company’s shareholders, which will be partially funded by its largest shareholder, Barry Diller’s IAC/InterActiveCorp. U.K. takeover rules mean MGM has until the end of Feb. 1 to issue a formal bid, and MGM said there’s no certainty one will be made.

Entain’s shares jumped 25% to 1,420 pence at 4:35 p.m. in London, the biggest intraday gain since 2009. MGM shares fell 4.7% to $30.02 in New York.

MGM, the largest casino operator on the Las Vegas Strip, formed a joint venture in 2018 with Entain, formerly known as GVC Holdings Plc, to capitalize on the growth of online betting in the U.S. Entain is behind an array of online gambling sites and brands, including Ladbrokes Coral and Bwin, which have become increasingly attractive after the U.S. legalized sports betting in 2018.

“We think that the market has not yet recognized the upside potential and momentum in Entain’s joint venture,” Jefferies analyst James Wheatcroft said in a note to clients on Monday. If the market valued the British company at the same level as its U.S. peer, DraftKings Inc., Entain could expect a valuation of about 1,975 pence per share, he said.

Growth in the industry has led to a slew of deals in the last year including Las Vegas-based casino giant Caesars Entertainment Inc.’s takeover of the U.K.’s William Hill Plc. Flutter Entertainment Plc, headquartered in Dublin, is upping its stake in U.S. bookmaker FanDuel and last year completed a deal for the Stars Group Inc.

Entain said it has asked MGM for more details on the strategic rationale for the combination and has requested shareholders to take no action. Entain shares gained 28% last year, giving it a market value of 6.6 billion pounds. MGM shares fell 5.3% in 2020.

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