Couldn’t see eye to eye

DraftKings’ pursuit of Entain is over. On Tuesday, the sports betting and daily fantasy sports leader said it has ended talks with Entain about acquiring the partypoker parent company. Neither company gave specifics as to way no deal could be agreed upon.

According to UK law (Entain is headquartered in the Isle of Man and listed on the London Stock Exchange), DraftKings must now wait six months before making another offer, if it ever plans on doing so. That rule goes out the window if another company bids on Entain. At that point, DraftKings could jump back in.

DraftKings offered $22.4 billion

DraftKings made its original, unofficial offer for Entain last month. CNBC reported on September 20 that DraftKings offered £25 per share, equating to a $20 billion total value. The next day, Entain made a public statement to confirm that DraftKings had put in a bid, but at the same time said the offer had already been increased to £28 per share, or $22.4 billion. That was a 46% premium over Entain’s closing price the previous day.

£6.30 per share would have been paid in cash, with the rest would coming in the form of DraftKings stock.

Again based on UK rules, DraftKings then had until October 19 to make a formal offer to Entain. Last week, the parties agreed to move that deadline back a month, implying that discussions were ongoing.

Last week, Entain listed the following as key items that needed to be resolved in any conversations with DraftKings:

• 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

MGM loomed large

It is thought that the BetMGM piece may have been the stickiest point. BetMGM is owned 50/50 by Entain and MGM and is a rapidly-growing force in the United States sports betting market. Its future seems very bright as more and more states legalize sports betting.

Naturally, MGM was concerned about the possibility of DraftKings, a major competitor, buying Entain and then possibly, in turn, acquiring Entain’s half of BetMGM. In September MGM commented on potential DraftKings/Entain deal, saying, “Any transaction whereby Entain or its affiliates would own a competing business in the US would require MGM’s consent.”

Analysts believed that one possibility would have been for MGM to buy out Entain’s half of BetMGM, thus preventing any conflicts with DraftKings. It would have been a great deal for MGM, as it would have gained control of BetMGM for less money than it would have cost to buy Entain. The head of MGM did say at one point that he would have looked into grabbing BetMGM.

Speaking MGM buying Entain, MGM did try that, offering $11 billion in January.

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