{"id":1617,"date":"2021-09-22T13:33:24","date_gmt":"2021-09-22T20:33:24","guid":{"rendered":"https:\/\/wagers.com\/staging\/4285\/?p=1617"},"modified":"2021-11-01T13:38:09","modified_gmt":"2021-11-01T20:38:09","slug":"draftkings-bid-for-entain-reaction","status":"publish","type":"post","link":"https:\/\/wagers.com\/staging\/4285\/news\/draftkings-bid-for-entain-reaction\/","title":{"rendered":"DraftKings bid for Entain &#8211; reaction"},"content":{"rendered":"<h4>The top line<\/h4>\n<ul>\n<li>Late last night, UK time, Entain released a further statement clarifying the terms of the offer received from DraftKings. It said that an initial offer of \u00a325 a share was rejected and that a renewed offer was received on 19 September worth \u00a328 a share or ~$22.4bn.<\/li>\n<li>This offer consisted of 630p in cash and the remainder in DraftKings shares and represented a 46.2% premium to the share price on 20 September.<\/li>\n<li>Entain said it will \u201ccarefully consider the proposal\u201d and a further announcement will be made as and when appropriate.<\/li>\n<li>Informed sources suggest a number of scenarios, with the two most likely being either DraftKings buys Entain and then sells BetMGM stake, with a subsequent licensing of tech.<\/li>\n<li>Alternatively, the bid flushes out another bid from MGM with either\/both a higher offer and a larger cash element.<\/li>\n<li>Other scenarios &#8211; DraftKings partnering with MGM and DraftKings buying out MGM from the JV are seen as being less likely.<\/li>\n<li>MGM also released a statement noting it would have to give consent to any deal but that it would engage with DraftKings and Entain to \u201cfind a solution to the exclusivity arrangements which meets all parties\u2019 objectives.\u201d<\/li>\n<li>As per UK takeover rules, a firm offer would need to be lodged by 19 October.<\/li>\n<\/ul>\n<p><strong>Three-legged race:<\/strong> This is the second bid for Entain this year following MGM\u2019s unsuccessful \u00a38bn\/$11bn offer in January. That ultimately failed on valuation grounds and on the face of it the circa 46% premium involved in this approach from DraftKings will at least satisfy that criteria. However, the near 20% rise in the Entain share price suggests UK investors were thinking a rival bid would emerge from MGM.<\/p>\n<p><strong>Money to cash: <\/strong>That calculus would change if it were effectively a joint bid. Analysts at Jefferies &#8211; who have been speculating for a while that MGM would go back in with a renewed Entain offer &#8211; point out MGM has $11.7bn on cash in the balance sheet following recent CityCenter and MGM Growth Properties deals. They suggest a lower range valuation of BetMGM to be ~$8bn; upper valuation range would be ~$14.2bn.<\/p>\n<p><strong>You snooze, you lose<\/strong>: Previously, MGM has made much of its interest in potentially owning more of BetMGM and just last week at a JP Morgan investor conference CEO Bill Hornbuckle said:<\/p>\n<blockquote><p><em>\u201cAs much as we critique ourselves for giving up half of the business, we are number two in the country\u2026 Having seen the business and understood it more clearly\u2026 we love the business and yes, we would like more of it,\u201d Hornbuckle added at the time.<\/em><\/p><\/blockquote>\n<p><strong>Buckle up:<\/strong> Hornbuckle also didn\u2019t demur when it was suggested that buying Entain was a \u201cperpetual opportunity\u201d that was there to be taken at MGM\u2019s leisure &#8211; a suggestion that now looks somewhat complacent. Similarly, speaking the week before CFO Jonathan Halkyard said the JV was \u201cbuilt to last\u201d. \u201cIt is exclusive, it is long-term. It is truly 50\/50.\u201d Analysts at Truist suggested \u201cit makes more sense for them to just buy Entain\u2019s 50% share of BetMGM.\u201d \u201cMGM owning all of its online business would be a clear long-term positive, in our view, though price would obviously be an important factor,\u201d Truist added.<\/p>\n<blockquote><p><em>The problem, however, is where the ownership of the tech resides. Noted Jefferies: \u201cThis presents the notion of how BetMGM continues its momentum through either buying or developing any capabilities that are no longer provided.\u201d<\/em><\/p><\/blockquote>\n<p><strong>Diluting juice:<\/strong> The value of DraftKings&#8217; prize would also be debatable. While it would gain a profitable international business &#8211; with the kicker of a very strong gaming operation &#8211; which could accelerate its move towards profitability, it would come at the expense of lower growth rates and a more complicated &#8211; and less exciting &#8211; story for investors who, as the analysts at Eilers &amp; Krejcik have pointed out, have bought into an online \u201cpure-play narrative\u201d and a suitably high multiple on future earnings.<\/p>\n<h3>Additional articles available on Earnings + More:<\/h3>\n<ul>\n<li><a href=\"https:\/\/wagersearningsmore.substack.com\/p\/22-sep-draftkings-bid-for-entain\" target=\"_blank\" rel=\"noopener\">FanDuel invests in Minute Media<\/a><\/li>\n<li><a href=\"https:\/\/wagersearningsmore.substack.com\/p\/22-sep-draftkings-bid-for-entain\" target=\"_blank\" rel=\"noopener\">Macquarie on horse wagering<\/a><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The top line Late last night, UK time, Entain released a further statement clarifying the terms of the offer received from DraftKings. It said that an initial offer of \u00a325 a share was rejected and that a renewed offer was received on 19 September worth \u00a328 a share or ~$22.4bn. This offer consisted of 630p [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[324],"tags":[590,591,640,641],"class_list":["post-1617","post","type-post","status-publish","format-standard","hentry","category-news","tag-draftkings","tag-entain","tag-fanduel","tag-minute-media"],"_links":{"self":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/1617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/comments?post=1617"}],"version-history":[{"count":2,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/1617\/revisions"}],"predecessor-version":[{"id":1620,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/1617\/revisions\/1620"}],"wp:attachment":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/media?parent=1617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/categories?post=1617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/tags?post=1617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}