Entain shares drop after MGM rules out takeover

Shares in UK gambling group Entain dropped by as much as 13 per cent on Thursday morning after casino operator MGM Resorts ruled out mounting a second takeover bid for the Ladbrokes owner, scuppering the hopes of investors for a big payout.

MGM, operator of the Las Vegas Bellagio casino, first made a bid for Entain in January 2021, offering shareholders equity in MGM that valued Entain at £8bn, or £13.83 a share, which was about a 20 per cent premium on its trading price.

But the offer was roundly rejected by shareholders, more than half of whom were institutional investors including money managers Capital Group, Janus Henderson and Abrdn.

However, industry insiders and some Entain shareholders had expected MGM to revive its bid once the UK government published its much-delayed gambling review — the first shake-up of industry rules in almost two decades, which is due to be published in the coming months.

On an earnings call after trading closed on Wednesday, when asked about a second bid for the FTSE 100 company, Bill Hornbuckle, MGM chief executive, said: “The simple answer is ‘no’, we’ve moved on.”

Hornbuckle said he remained “highly focused” on BetMGM, a betting and gaming joint venture co-owned by MGM and Entain that operates in 25 US states. He added that he would focus on expanding LeoVegas, a mobile betting operator that MGM bought for $604mn last year.

“So for now, the answer is ‘no’, not within Entain. We’re going to go down our own direction as we begin to allocate capital,” he said.

Entain’s share price fell almost 13 per cent to below £14 in morning trading, before recovering slightly to £14.43 — a drop of about 8 per cent on the previous day. Entain declined to comment.

One top-ten Entain shareholder said they had assumed the MGM bid was an “inevitability” as the US casino operator sought to take full control of the joint venture. “Gambling review, rubber stamp, box tick, bid, give me money,” is how they said they had hoped the process would go.

Analysts had predicted MGM could have upped the offer and offered cash following positive share price moves, the collapse in the value of sterling against the dollar, as well as a property sale since the original takeover bid.

The top-ten shareholder said they had been hoping for up to £20 a share.

Ivor Jones, an analyst at Peel Hunt, said a second bid for Entain, which also owns sports betting site Bwin and online gaming group Partypoker, had been “a widely held industry assumption”. But now MGM had backed down, it opened up the possibility of MGM buying Entain out of the joint venture.

“Buying Entain would have been a pretty large sledgehammer to crack the nut of the joint venture if that’s what MGM is after,” said Jones.

BetMGM posted $1.4bn in revenues last year and is set to turn profitable by the second half of this year. The joint owners are expected to invest an additional $150mn in the company in the coming months.

Greg Johnson, an analyst at Shore Capital, said that despite Hornbuckle’s comments, MGM might yet return and try to buy Entain. “Do I think they’ve walked away forever? Possibly not. I’m not sure how [MGM] get world domination, if that’s what they are after, through LeoVegas.”