US fund Corvex urges Entain to turn around ‘unacceptable’ performance

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Corvex has become the latest US activist hedge fund to disclose a significant stake in Ladbrokes owner Entain, saying a more radical overhaul was needed to turn around the group’s “unacceptable” performance.

The intervention by Corvex comes a day after Entain’s former chief executive Jette Nygaard-Andersen resigned having come under fire for the FTSE 100 group’s slumping share price this year and a series of botched acquisitions.

Its 4.4 per cent stake makes Corvex, which is run by Keith Meister, a former lieutenant of billionaire activist investor Carl Icahn, one of Entain’s top ten shareholders and increases the pressure on the group’s chair Barry Gibson and interim chief executive Stella David to examine a possible sale of the company or some of its assets.

Over the past three years, Entain’s board has walked away from two takeover approaches from US gambling operators MGM Resorts International and DraftKings that valued it at a premium to the current share price.

Entain has a joint venture with MGM in the US, where sports betting has in recent years been legalised in dozens of states. Corvex also holds a stake in MGM, where Meister is a board director.

While Entain’s “recent management change was a necessary first step, further change is required,” Corvex said in a statement. “Simply put, Entain’s recent performance has been unacceptable and all options must be considered to drive value.”

Shares in Entain jumped almost 7 per cent to slightly more than £9 in morning trading.

Entain was at a “critical juncture”, Corvex added, and would benefit from a shareholder with “substantial industry and company-specific experience and expertise”.

Nygaard-Andersen’s exit came after less than three years in the job and followed reports in the Financial Times that several US activists had taken stakes amid growing internal discontent among staff about her leadership.

Under Nygaard-Andersen, Entain embarked on a costly spree of bolt-on acquisitions costing more than £2bn while also losing share in several important markets. 

Three new board members are expected to be appointed in coming weeks, according to two people familiar with the matter.

The other activist investors — New York-based activist funds Eminence Capital, Sachem Head Capital Management and Dendur Capital — are pushing to take most, if not all, board seats with the aim of controlling the hiring process for the new chief executive and any future mergers and acquisitions, according to people familiar with the funds’ thinking.

Ricky Sandler, founder of Eminence which owns between 4 and 5 per cent of Entain’s stock, is positioning himself for a board seat, and has received public backing from one of Entain’s biggest institutional shareholders Janus Henderson.

“We constantly engage with all of our shareholders, and are committed to constructively addressing any questions or concerns that they may have,” said Entain. “We remain confident in our ability to deliver on the significant growth opportunities that are ahead of us.”

Corvex said it would “immediately engage” with Entain’s Gibson and David. Some activists are unclear whether they can work with Gibson on a sale of the group or its assets after the FT reported earlier this month that MGM chief executive Bill Hornbuckle viewed him as an obstacle to a takeover.

Gibson was key to Entain’s decision to walk away from the two takeover approaches. A person close to Entain stressed that “the board as a whole considers these matters as is their duty, not just Barry”.

In the past, Corvex has been known for activist campaigns at companies including French consumer goods company Danone and telecoms group CenturyLink.