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Entain mulls 2,800p offer from Draftkings; says rejected earlier 2,500p bid

Last updated: 08:49 22 Sep 2021 BST, First published: 07:27 22 Sep 2021 BST

Entain PLC -

Ladbrokes and Gala Bingo owner Entain PLC (LSE:ENT) confirmed Draftkings Inc (NASDAQ:DKNG) made a possible takeover offer of 2,800p per share for the company.

The FTSE 100 bookmaker and online gaming group said it rejected an earlier offer from the US company at a price of 2,500p, with the latest bid coming on 19 September.

The 2,800p potential offer would consist of 630p per share in cash and the balance in Draftkings shares, based on the exchange rate at the time of the first announcement, which would equate to a total offer worth £15bn.

Entain's board said they will “carefully consider the proposal”, noting it is at a premium of 46.2% to the closing share price on 20 September.

A statement said the board strongly believes in the future prospects of the company underpinned by its leading market positions, world class management team and industry-leading technology. It added it has a strong track record of growth and has the potential for its total addressable market to grow by more than three times to $160bn. 

Earlier this year Entain turned down an £8bn offer from MGM Resorts International (NSX:MGM), its partner in the BetMGM joint venture that is one of the leading operators in the fast-expanding US market.

Entain's board is led by chairman Barry Gibson, who has been in place since 2019, and chief executive Jette Nygaard-Andersen, who joined after her predecessor left just after rejecting the 1,383p-per-share MGM Resorts bid.

In the meantime, MGM has released a statement saying that “any transaction whereby Entain or its affiliates would own a competing business in the U.S. would require MGM's consent".

This week's move from Draftkings follows a takeover of Entain's rival William Hill by its own US partner, Caesars, for £2.9bn.

The deadline for DraftKings to make a firm offer is 5pm on 19 October.

Market reaction

The shares traded up 7% in London to 2,432p.

This suggested investors are not betting the farm on this deal going ahead, said analyst Neil Wilson at Markets.com. “Consolidation in this space has been taking place for years over this side of the pond. Deregulation of the US sports betting market was always going to create further change as the technology and expertise of the British firms came to the fore – the question I have why are these takeovers not going in the other direction?"

At Citigroup, analysts said it was “game on", with a combination between DraftKings and BetMGM implying a 44% share of the US iGaming market, a sports betting share of around 19% and total market share of circa 37%.

“This could potentially raise antitrust concerns, although the nascent nature of the market may be a mitigating factor," Citi said.

Jefferies analysts suggested DraftKings buying Entain's non-US assets and MGM Resorts buying out the BetMGM joint venture “would suit the stated strategies of both business: DKNG desires international exposure and MGM seeks digital growth".

Since proposing its 1,383p offer (at 0.6 of an MGM share per Entain share) in January, MGM has accumulated more cash on its balance sheet, Jefferies noted, with US$5.6bn at the end of June and another US$6.5bn cash incoming from recent asset sales.

They added that while Entain has said there is no similar 'poison pill' as Caesar had William Hill, the shares/cash mix of DraftKings' offer could be an issue for some shareholders. 

Analyst Laura Hoy at Hargreaves Lansdown added: “While Entain confirmed it would mull the proposal over, there’s no guarantee that a deal will go ahead. Even if the offer is accepted, the usual regulatory scrutiny could be further complicated by antitrust concerns due to BetMGM, Entain’s joint venture with US Casino operator MGM.

“We suspect that BetMGM is a big part of the reason DraftKings is interested at all...But MGM will have a hand in negotiating the terms of the deal, which could ultimately put DraftKings off following through. There’s also a chance DraftKing’s bold move could push MGM to make another offer for Entain, though we think this possibility is unlikely considering it would require MGM to substantially increase its former offer.”

She said that Draftkings would probably spin off or sell any unwanted UK assets, as seen with Caesars Entertainment and William Hill recently.

   **UPDATE: adds shares, broker comment**

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