Could DraftKings Beat MGM To Acquiring BetMGM Joint Venture? What Investors Should Know

The sports betting market continues to see new players emerge as casino and sports-related companies look to take advantage of the growing market.

With the increased number of players, it becomes likely consolidation will happen. It has already started in 2021 and looks ready to heat up, particularly with the announced talks on Tuesday between two companies.

What Happened: Online sports betting giant Draftkings Inc DKNG confirmed it made a bid to acquire Entain ADR GMVHY, a European-based betting company.

The reported price tag of $20 billion includes cash and DraftKings shares and is a premium to the $18 billion valuation Entain had prior to the news.

Entain owns brands like Eurobet, bwin, Ladbrokes, partypoker and PartyCasino and is one of the largest sports betting companies in the world. The company has licenses in 20 countries on five continents.

Entain also is a 50% owner of BetMGM, a joint venture with MGM Resorts International MGM which owns the other 50%.

MGM Resorts attempted to acquire Entain earlier this year with bids of $10 billion and $11 billion. Entain said at the time that the bid from MGM “significantly undervalues” the company’s assets.

A statement was issued from MGM Resorts International confirming they were aware of DraftKings’ potential offer for Entain.

“MGM is Entain’s exclusive partner in the U.S. online sports betting and iGaming market through our highly successful 50/50 joint venture BetMGM LLC,” the company said.

MGM said it would have to consent to any transaction involving a competitor owning Entain and the joint venture.

“MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.”

MGM will work with Entain and DraftKings on a solution going forward, the company added.

Related Link: Could Spinning Off Online Sports Betting Help Casino Stocks? 

Why It’s Important: DraftKings announced the acquisition of Golden Nugget Online Gaming Inc GNOG earlier this year.

Penn National Gaming PENN also announced plans to acquired Score Media and Gaming Inc SCR earlier this year.

DraftKings and FanDuel have dominated the online sports betting market with BetMGM coming in third place in several states.

The bid by DraftKings could be seen as a move to expand internationally and also to gain the growing share of BetMGM in the U.S. The involvement of MGM will likely lead to a resolution having to be reached by DraftKings and MGM.

MGM could also use this news as a starting point to re-enter negotiations with Entain for an acquisition or buyout of the BetMGM joint venture.

One possible scenario could be DraftKings acquiring the European assets and MGM Resorts grabbing 100% ownership of BetMGM.

More news is likely to come soon and given the competitive environment in online sports betting and the number of deals already announced could be only the beginning.

Price Action: DraftKings shares fell Tuesday on news of the deal with shares trading down at market close 7.42% to $52.77.

MGM shares were down 1.74% to $40.55 Tuesday at market close.

Photo: Erik McLean via Unsplash