Parties need more time

Today was the deadline for sports betting and daily fantasy sports leader DraftKings to officially make an offer to buy partypoker owner Entain, but an offer never materialized. That does not mean that the deal is dead, however, as Entain has extended what it calls the “put up or shut up” deadline to November 16.

Entain explained on Tuesday that it has been talking with DraftKings about a possible transaction, but it still needs to resolve a few items “that are fundamental to the structure and value of the Proposal.” Said matters include:

Total value creation for Entain shareholders, including share of potential synergies
Terms for any proposed technology supply agreement to BetMGM and MGM
Governance rights and value protection for the combined entity’s stake in BetMGM
Governance and management composition of the pro forma DraftKings / Entain entity
Deliverability of the potential transaction, including anti-trust and regulatory clearances

For its part, DraftKings sees the benefits of a combination as

Expansion into regulated and regulating markets
Accelerated product growth
Innovation in new and existing verticals

The gaming and business worlds first learned that DraftKings was interested in acquiring Entain on September 20, when CNBC reported that DraftKings had a $20 billion offer on the table. The companies were quiet for about a day, but Entain finally spoke up, saying that DraftKings had offered £25 per share, which does come out to about $20 billion.

Entain added, however, that DraftKings had already increased its offer to £28 per share, the equivalent of $22.4 billion. Of that price, £6.30 per share would be in cash, while the rest would come in DraftKings stock. In total, it was a hefty 46% premium over Entain’s closing price the previous day.

So DraftKings did make an offer to buy Entain, but financial transactions are a complicated matter, so it appears that it wasn’t a “formal” bid, hence the October 19 deadline which has now been moved back a month.

MGM is watching

One major hurdle that the two companies will have to overcome is MGM. Entain and MGM jointly own BetMGM, a rapidly growing force in the United States sports betting industry. Should DraftKings buy Entain, it would naturally follow that it would gain half of BetMGM, which one would guess is not something MGM would be too happy with, since the companies are competitors and all.

As such, MGM said last month: “Any transaction whereby Entain or its affiliates would own a competing business in the US would require MGM’s consent.”

Analysts believe there is a good chance a deal could be struck where MGM would buy out Entain’s half of BetMGM. This would potentially work out great for MGM, as it would get full control of BetMGM for much cheaper than it would if it had to buy Entain completely.

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