DraftKings Offers $22bn for Entain
Entain has confirmed that fantasy sports operator DraftKings has approached it with an offer of $22 billion. The sportsbook is keen to acquire Entain, as it seeks to reinforce its position in the emerging US sports betting market.
DraftKings is one of the most popular daily fantasy sports providers in the US. ©Dom Le Roy/Pexels
Entain Confirms Interest
The Board at Entain has responded to media speculation over the potential of a takeover by US sports betting firm, DraftKings. Publishing a statement, Entain revealed that DraftKings had made its initial offer at £25 per share. Consisting of a combination of group shares and cash, that first offer valued the business at $20 billion, or £14.6 billion.
Entain rejected that initial offer, but DraftKings responded with a revised bid of £28 per share. The second offer is comprised of a £6.30 cash settlement, with the leftover balance payable in new DraftKings Class-A common shares. That offer now values Entain at $22 billion, or £16.5 billion.
According to DraftKings, its revised offer represents a 46.2% premium on Entain’s closing share price on September 20th, 2021. Entain CEO, Jette Nygaard-Andersen, said that the offer is being considered by board members, with a further announcement to be made. Shareholders have been told not to take any action yet while the offer is still being evaluated.
In its statement, Entain recapped the competitive value of its future prospects, supported by its leading market positions, top management team and industry-leading technology. The board also noted the company’s proven track record of growth, which shows no signs of abating. On August 12th, it outlined potential to triple its total addressable market to $160 billion.
Entain also stated that it has the most diversified and regulated revenues out of all the global operators. It is also ahead of the curve when it comes to player protections, thanks to its industry leading ARC program. ARC, or Advanced Responsibility and Care, uses measured stake limits and affordability checks to protect customers that it detects are at risk of gambling harms.
Entain, previously known as GVC Holdings, is the international betting and gaming operator responsible for such brands as Ladbrokes, Coral, PartyPoker, bwin and Sportingbet. With its headquarters on the Isle of Man, the operator is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
Problems for MGM
DraftKings’ bold move on Entain has not gone unnoticed in the trading world. It sparked a rush of interest, resulting in Entain LSE’s share price leaping up 20% to £22.60. Meanwhile, DraftKings Nasdaq price dipped by 5% to $55.77. However, its shares are more than five times higher than two years ago, when it announced its SPAC merger.
Entain’s approach to takeover negotiations has also attracted widespread media speculation, with some analysts praising the foresight of chairman Barry Gibson. At the beginning of the year, Entain turned heads by rejecting an $11 billion offer from MGM Resorts.
Entain already has a close working relationship with the US casino operator, through its BetMGM partnership. Launched in 2018, the joint venture has helped to establish Entain as a leader in the rapidly growing North American sports betting market. Despite the existing partnership, Entain rejected the offer. According to then-CEO Shay Segev, the bid significantly undervalued the company and its prospects.
Less than a year later, and Entain’s decision to hold out for a better offer seems to have been proved right. DraftKings’ offer is worth twice the amount that MGM was prepared to stake on a takeover. Some industry analysts have speculated that MGM may attempt to table a better offer.
MGM could also continue to cause problems for Entain if it went with another operator, such as DraftKings. Analysts say that MGM would likely have to provide Entain with its consent if it were to strike a deal that made it a US competitor. To gain that approval, it is also possible that DraftKings would have to sell Entain’s 50% stake in BetMGM back to MGM.
In that scenario, DraftKings would be left with Entain’s operations outside of the US, in addition to its technology and expertise. Another possibility, although less likely, is that DraftKings could seek its own merger with BetMGM, giving MGM a stake in its new company.
US Sports Betting on the Rise
It is clear that Entain’s wealth of sports betting experience is a sought-after asset, but it remains to be seen how far US operators will stretch to take on that advantage. Since the Supreme Court overturned PASPA in 2018, US states have been allowed to legislate for themselves on whether to legalize sports betting.
That has been a gradual process, but the number of states in which betting is legal is steadily rising. So far 32 states have legalized the practice, although rules vary from state to state. The market potential for American gambling operators, which up until now have primarily run casinos, is clear.
However, as the sports betting market there is brand new, US operators are faced with a problem. Having never run sportsbooks before, they lack the expertise to lead the market. Knowledge of multiple disciplines is vital, such as in technology, marketing and regulations.
One response to the problem has been to turn to operators from more developed markets for expertise. US operators have formed partnerships, joint ventures and made acquisitions with UK and European betting firms in order to get a head start. In October 2020, Las Vegas casino operator Caesars Entertainment agreed to buy British bookmaker William Hill for £2.9 billion.
The acquisition was completed earlier this year, and William Hill’s non-US assets, which Caesars had no interest in retaining, were auctioned off to 888 Holdings for £2.2 billion. Entain could find itself in a similar position if purchased by DraftKings, due its existing partnership with MGM.
DraftKings’ approach comes just weeks after it a secured $1.56 billion deal to purchase US competitor, Golden Nugget. The award-winning online gaming operator offers US consumers live online casino products, and its acquisition offers DraftKings a range of new opportunities. Announcing the deal, DraftKings CEO, Jason Robins said:
“Our acquisition of Golden Nugget Online Gaming, a brand synonymous with iGaming and entertainment, will enhance our ability to instantly reach a broader consumer base, including Golden Nugget’s loyal ‘iGaming-first’ customers.”
