Ladbrokes Owner Entain Says MGM $11B Takeover Bid 'Significantly Undervalues Company'

MGM Resorts International (NYSE: MGM) offered to acquire its BetMGM partner, Entain Plc (OTC: GMVHY), for consideration of £8.09 billion (roughly $11.06 billion), according to a Wall Street Journal publication. Entain has rejected the offer arguing that it “significantly undervalues” the company, the Financial Times reports.

What Happened: The offer for Entain’s business is in line with MGM’s plans to seize growth opportunities in the online sports betting markets within the U.S, claims the Journal. WSJ went ahead to report that, if agreed, this acquisition deal consideration will comprise of a substantial stock component instead of the earlier proposed $10 billion all-cash transactions.

MGM’s latest valuation pegged one share of Entain at par with 0.6 MGM shares, estimating Entain’s stock at 1,383 pence, a 22% premium based on Thursday’s closing price.         

The British sports betting company Entain is a licensed operator in more than 20 countries and was formerly known as GVC Holdings. The company decided to undergo a rebranding process in December 2020.

As per FT, Entain said that it had requested MGM for more information “in respect of the strategic rationale for a combination of the two companies.”

Why It Matters: MGM’s hotels and casino businesses took a hit during the pandemic, both due to the lockdown measures as well as the mandatory regulations requiring a reduced occupancy, as per WSJ.

MGM is turning its attention towards the growing online betting industry through acquisitions and partnerships to boost growth.

In early December, MGM generated $700 million by redeeming its operating partnership units in MGM Resorts. Over the course of the month, BetMGM expanded in Pennsylvania, including the launch of its mobile betting app. Towards the end of the month, it also tied up as an official sports betting partner with the Philadelphia 76ers.

In 2018, GVC Holdings acquired the London-based betting and gambling company Ladbrokes Coral Group Plc for $5 billion.

Price Action: MGM shares are up by 0.60% to $31.70 in the pre-market session on the last check Monday.

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