MGM buying Entain is a dream the former gave up in January 2021. Or did it? Is MGM Resorts International again considering buying its tech partner in its joint venture – gambling site BetMGM? Rumors to that effect are swirling yet again.
Even though Entain rebuffed MGM’s $11 billion offer and a subsequent $22 billion bid from DraftKings in October 2021, several industry sites and at least one analyst report that MGM’s acquisition interest is piqued. Most of the speculation is based on BetMGM‘s market performance as the No. 1 US online casino operator during Q3 2022, with 31% of the market.
On Saturday, Will Hershey opined in the newsletter for the investment advisor firm Roundhill Investments.
Roundhill Co-founder and CEO Hershey writes:
We continue to believe there is a high likelihood of MGM re-engaging in takeover discussions with Entain in an attempt to take full control of the crown jewel in BetMGM.
Since Nov. 21, when a site that only reviews illegal offshore online gambling sites published that it heard from “a source with strong connections to MGM” that MGM buying Entain is again on the table.
After the OffShore Gaming Association (OSGA) blog post was published, Hershey, Seeking Alpha, and others repeated the claims.
From Nov. 21 to today, MGM stock dropped more than 3% and Entain stock (GMVHY) rose nearly 6%.
Bonus contacted analysts, Entain, and MGM today about the rumors.
Only Entain Corporate Communications Head Lisa Attenborough responded:
We don’t comment on rumour or speculation.
MGM Buying Entain Would Cost a Lot
Many analysts say this economy isn’t the best for online gambling operators considering mergers and acquisitions. Market data bears that out.
However, MGM just spent $604 million to buy LeoVegas Group. MGM leaders call that acquisition that closed in September its international online gambling presence.
That’s millions, not billions.
MGM buying Entain would cost a lot more.
On Wednesday, Entain bought Croatian iGaming and sportsbook operator SuperSport Group for more than MGM paid for LeoVegas. Entain helpfully points out that it used most of a $1 billion loan it secured on Oct. 19 to buy the operator.
During Entain’s Q3 2022 earnings call on Oct. 13, company CFO and Deputy CEO Rob Wood reports:
Our balance sheet is healthy. We are still forecasting to end this year a little under three times levered, despite five acquisitions this year or nine over the last year and a half. So you know we feel good that for the right deals, the right terms, then there is capacity and desire to carry on with M&A.
During the same call, Entain CEO Jette Nygaard-Andersen even hinted at a BetMGM IPO – if the operator turns a profit in 2023.
So Hershey says on Saturday in his subscription-gated newsletter:
Any potential transaction to increase ownership in BetMGM is likely to be expensive, however, as Entain shareholders attribute a great deal of value to their exposure to the growth of the US market. As a result, I see a full takeover attempt of Entain as the most likely outcome here for two primary reasons:
(1) MGM has signaled its interest in online gaming outside of the US via its purchase of LeoVegas earlier this year; and
(2) investor preferences have shifted towards near-term profitability versus long-term top line growth, making Entain’s full suite of assets, including its profit-making European and UK operations a more palatable transaction for MGM to pursue.
Is MGM buying Entain? It may want to do so, but probably not enough to spend the billions required.
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