Entain believes it’s worth more

When Entain announced on Monday that it had rejected MGM Resorts International’s £8.1 billion ($11.1 billion) acquisition offer, it said that it wanted MGM to “provide additional information in respect of the strategic rationale for a combination of the two companies.”

As it turns out, MGM did provide that additional information and it did so via its own public press release.

At the outset, MGM confirmed that it had, in fact, made a purchase proposal and echoed the same terms that Entain had laid out in its announcement. MGM offered 0.6 shares for each Entain share, valuing Entain at 1,383 pence per share. That is a 22% premium over Entain’s December 31, 2020 closing price. Entain would control 41.5% of the shares of the merged company.

Entain declined the offer, saying it undervalued the company.

MGM lays out its case

In its press release, MGM said its reasons for wanting to combine with Entain are “compelling.” To that end, here they are:

• Deliver full control of the BetMGM business to leverage the rapidly growing U.S. iGaming and sports betting opportunity
• Position the Company as a global gaming company across both online and retail with a leading end-to-end technology stack
• Expand and diversify the Company’s operations, product offerings and earnings
• Position the combined Company for future growth and investment by leveraging its leading brands, leading technology platform and strong balance sheet

Entain isn’t the “name” that MGM is, but it owns a heck of a lot of names in the online gambling world: partypoker, PartyCasino, Ladbrokes, Coral, sportingbet, bwin, and more. It is one of the internet gaming world’s most significant players.

This explains most of MGM’s pursuit of Entain. MGM sees Entain as a way to add a huge online business to its already sprawling brick-and-mortar casino empire. And with the acquisition comes a “leading technology platform.”

BetMGM is the big prize

As to the first bullet point, MGM and Entain launched BetMGM as a joint venture in July 2018 to take advantage of the recently legalized sports betting industry in the US, primarily as an online betting business. BetMGM (originally Roar Digital, but the BetMGM brand name has taken over as the name the company goes by) also operates online casino and online poker sites.

A merger would give MGM complete ownership of BetMGM in order to fully capitalize on the US internet gaming and sports betting market while keeping the Entain’s technology. It also covers MGM in case the two companies have a falling out or if Entain just decides it does not want to work with MGM anymore. What to do about their joint venture could be complicated and messy. Acquiring Entain makes things much easier and eliminates that potential problem.

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