MGM Seeking Full BetMGM Control, Unlikely to Renew Entain Takeover Offer

Posted on: September 22, 2021, 02:18h. 

Last updated on: September 22, 2021, 02:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International (NYSE:MGM) is rumored to be mulling avenues to gain full control of the BetMGM enterprise, and is unlikely to make another acquisition offer for its partner on that businesses, Entain Plc (OTC:GMVHY).

MGM BetMGM
MGM is considering ways to get control of BetMGM. Those efforts could include an IPO. (Image: YouTube)

The speculation about MGM’s plans for BetMGM surfaces a day after it was revealed DraftKings (NASDAQ:DKNG) is in talks with Entain regarding a takeover, potentially putting MGM in an awkward position.

So advanced are the discussions that after the Ladbrokes parent rejected a $20.5 billion cash and equity offer, DraftKings floated a $22.4 billion cash and stock bid. Entain confirmed receipt of the initial bid, that it turned down, and that it received a second pitch from DraftKings.

Where things get even more interesting is MGM’s long-held desire to have full control of BetMGM and its ability to influence Entain takeover talks.

Management of MGM Resorts believes that gives them leverage to gain control of BetMGM without spending a great deal of cash, said the people, who asked not to be identified discussing private deliberations,” reports Bloomberg. “MGM is unlikely to bid again for all of Entain or try to buy out the other half of the venture, one of the people said.”

In January, the Bellagio operator offered $11.06 billion in stock for all of Entain. But the UK-based company called the bid inadequate. Despite speculation to the contrary, the casino operator hasn’t returned to the negotiating table.

Options for BetMGM

A variety of avenues are at MGM’s disposal in terms of gaining control of BetMGM, some of which won’t require the casino company to lay out large amounts of capital.

Sources tell Bloomberg the gaming company could seek majority control of BetMGM or push for a spinoff of the unit. Gaming firms spinning off iGaming and sports wagering arms are increasingly common as an avenue to maximize shareholder value. As two well-known examples, Flutter Entertainment (OTC:PDYPY) is expected to spin-off FanDuel next year, and Wynn Interactive is being spun out from Wynn Resorts (NASDAQ:WYNN) later this year.

Should MGM gain the ability to bring a BetMGM initial public offering (IPO) to market, it could look to smooth things over with DraftKings and Entain by using technology provided by that combined company.

That’s not a stretch, because as BetMGM is structured today, MGM is responsible for branding and marketing, while Entain performs much of the behind-the-scenes infrastructure.

MGM in the Driver’s Seat

When news of DraftKings’ bid for Entain initially broke, it may have appeared as though MGM was caught flat-footed. But with the situation evolving seemingly by the hour, it’s becoming clear the casino operator has plenty of cards to play.

Notably, a combined DraftKings/Entain qualifies as a competing firm, and since it involves an American company — DraftKings — MGM most approve the deal. That’s etched in the BetMGM agreement with Entain.

While MGM’s desire to control all of the iGaming and sports wagering unit is well-documented, and opting for a congenial tone could make life easier for all parties involved, there is precedent in gaming mergers and acquisitions for suitors playing hardball.

When it was courting William Hill last year, Caesars Entertainment (NASDAQ:CZR) told the British bookmaker that if it accepted another offer, the US agreement between the two operators would be scrapped. MGM isn’t publicly indicating it wants to go down that road, but it’s an option at the company’s disposal.