MGM Resorts May Consider Bid for BetMGM, Suggests Report

Last week, the owner of Ladbrokes and Coral, Entain, saw growing pressure from US activist hedge funds, Sachem Head Capital Management and Dendur Capital, showing concerns about the company’s leadership under CEO Jette Nygaard-Andersen and its share price. The two additional US activist hedge funds joined Eminence Capital as an expanding number of investors who are discontented with the present state of the company, media reports revealed at the time.

Now, as announced by SBC News, the leading gaming and entertainment company, MGM Resorts, likely won’t be showing interest in bidding for Entain. The newly released report reveals that MGM Resorts will not be interested in a bid for the leading UK gambling company but may consider obtaining the outstanding 50% share in its joint venture with the company, BetMGM.

In case MGM Resorts bids for BetMGM, the company may be looking to acquire 100% of the brand, taking control of its tech stack as well as revenues. With such a bid yet to be confirmed, it is unclear what price tag the deal may have. Yet, the potential acquisition of 50% of BetMGM may be costly, considering its strong presence across the United States. Upon releasing its Q3 results, Entain confirmed that BetMGM holds approximately 18% market share in the country, a figure that designates it as the third-largest online gaming brand in the US.

There are various issues that led to MGM Resorts’ decision. Such include a failed previous bid as well as competition including the recent launch of BetMGM within the regulated gambling sector in the UK. Moreover, BetMGM faced competition in the market in Ontario with Entain’s launch of Sports Interaction and bwin.

Goldman Sacks Downgrades Entain from Buy to Sell

Amid the mounting pressure from the activist hedge funds last week, Entain’s share price hit a three-year low last week. Earlier this week, Goldman Sachs, the leading investment bank and financial behemoth, confirmed it downgraded Entain from buy to sell. This action acknowledged the company’s ongoing issues that mark a combination of regulatory headwinds and market competition, among other factors.

As of Monday this week, Goldman Sachs lowered its price target for Entain from 1450p to 820p, a dip of 4%. According to Ben Andrews, a leading research analyst with Goldman Sachs, Entain agreed to pay £585 million, a larger than initially expected settlement regarding an investigation of the HMRC. The analyst warned that BetMGM is also losing market share.

The combined impact of those factors, along with other headwinds resulted in Andrews predicting negative pro-forma online growth for Entain in Q4 2023 as well as H1 2024. He estimated that Entain’s pro-forma online growth may return to positive in H2 2024.