DraftKings Walks From Potential $22.4 Billion Offer for Entain
(Bloomberg) -- DraftKings Inc. said it won’t make a final bid for Entain Plc, stepping away from a deal valued at about $22.4 billion and halting a merger frenzy in the gambling industry.
DraftKings had offered 2,800 pence a share in cash and stock on Sept. 19 for Entain, owner of British bookmakers Ladbrokes and Coral. The offer represented a 43% premium over the stock price at the time and improved on an earlier 2,500-pence bid.
Entain shares fell 6.2% in trading in London on Tuesday at 3:30 p.m., while DraftKing’s shares rose 6.5% in early New York trading. MGM shares fell 0.7%.
In mid-October Entain asked the U.K. merger regulator for an extension to Nov. 16 for DraftKings to make a firm offer, after failing to reach an agreement over a technology licensing agreement and governance structure for BetMGM, an online joint venture between Entain and MGM Resorts International.
U.K. takeover rules meant DraftKings had to announce its firm intent to make a deal, or be frozen out in making a further offer for six months from the original Oct. 19 deadline.
“Based on our vertically-integrated technology stack, best-in-class product and technology capabilities and leading brand, we are highly confident in our ability to maintain a leadership position and achieve our long-term growth plans in the rapidly growing North America market,” Jason Robins, DraftKings chief executive officer, said in a statement Tuesday.
Entain has been in the sights of U.S. gambling companies eager to go global since the U.S. Supreme Court in 2018 allowed sports betting to expand beyond Nevada. Casino operator Caesars Entertainment Inc. bought Britain’s William Hill in April, Ireland’s Flutter Entertainment Plc bought Stars Group Inc. in Canada last year, and Bally’s Corp. is in the process of buying Gamesys Group Plc.
What Bloomberg Intelligence Says:
“The decision not to make a firm offer, which was received favorably by the market, eliminates any potential equity-dilution risk from adding European brands intended to complement DraftKings’ U.S. online-sports-betting focus.”
-- Brian Egger, BI senior gaming industry analyst
Click here to read the research.
MGM Resorts International tried to buy Entain earlier this year for $11 billion, but walked away rather than raise its bid.
MGM Resorts had made clear it wanted a seat at the table in the DraftKings-Entain talks, noting that any deal that results in a competing U.S. operation would be subject to its consent.
The key question now is whether MGM decides to make another bid, either for the half of BetMGM it doesn’t own or Entain itself, said David Brohan, an analyst at Goodbody, in a note to clients.
“The board strongly believes in the future prospects of Entain,” Entain said in a statement.
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