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On 21 September 2021, Entain plc (Entain) confirmed that it had received two approaches from US sports betting operator DraftKings Inc. (DraftKings). The first approach received on 19 September 2021 was comprised of a combination of DraftKings shares and cash at £25 per share and was rejected. The new proposal values Entain at a whopping £16.4bn (a hefty premium above the £8bn that MGM Resorts International (MGM) had offered for the company in January 2021), with DraftKings offering £28 per share, consisting of £6.30 on cash and the balance in DraftKings Class A shares. News of the approach caused Entain’s shares to surge by 18%, reaching £22.61 at close of business on 21 September.
Entain’s rebuff of MGM’s offer earlier this year has certainly paid off, with DraftKings’ offering worth twice as much as MGM for the company. However, MGM may prove to be a hurdle that must be overcome in DraftKing’s plans. MGM holds an exclusive partnership with Entain in the US online sports betting and iGaming market via their 50/50 joint venture vehicle BetMGM LLC. On announcement of the offer, MGM kindly reminded the parties involved that any transaction that would result in Entain or its affiliates owning a competing business in the US would require MGM’s consent. Despite MGM’s interest in Entain earlier this year, given that the joint venture agreements will confer upon MGM powers to influence the deal, it is unlikely that we will see a competing offer emerge.
Since the US Supreme Court overturned a federal ruling banning sports betting in 2018, the US has become a land of opportunity for operators looking to win market share. The gradual legalisation of sports betting has seen US operators looking to cash in on the built-in expertise of the established UK market. This year has seen US casino operators buying UK businesses, with Caesars Entertainment, Inc closing its £2.9bn bid for William Hill plc (William Hill) in April 2021 and Bally’s Corporation’s £2bn bid for online gaming operator Gamesys Group plc expected to close in October 2021. The gambling sector has certainly been hot with consolidation this year and US bidders are not the only ones interested. Just two weeks ago Gibraltar-based online operator 888 Holdings plc (888) announced that it would acquire William Hill’s UK and European business in a £2.2bn deal. Announcement of the Entain offer also saw shares in other FTSE 350-listed gambling companies experiencing a bump in price, with 888, Flutter Entertainment and The Rank Group experiencing a 1%-6% price increase, indicating market confidence in the gambling sector.
This high level of activity for the gambling sector reflects the trends outlined in our Public M&A H1 2021 Trend Report, with Sunjay Malhotra at Pinsent Masons noting that ‘US gaming companies with deep pockets see UK operators with an established presence and expertise in the online sports betting market as a ‘must-have’ in order to help with their own expansion into the sports betting world as the US liberalises its gambling rules over the next few years. As a result, we can expect to see US bidders offering substantial premiums to super-charge the scaling up of their domestic operations.’
DraftKings has until 19 October 2021 to announce a firm intention to make an offer or withdraw its interest.
Market Tracker will continue to monitor these transactions. See our upcoming Public M&A Q3 2021 update for further analysis on the trends seen in this quarter.
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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