Nevada based MGM Resorts International is seeking to buy British Gaming Company Entain PLC, previously known as GVC Holdings. The UK company received multiple proposals from MGM where the latest is an $11.1 billion proposal on Monday.
Board members of Entain Group asked MGM to provide additional information in respect of the strategic rationale for a combination of the two companies.
A combination of MGM and Entain could create one of the biggest gaming companies in the world with a significant online and bricks-and-mortar presence. According to the proposal of the MGM-Entain deal, the resulting merge would generate about 30% of its earnings before interest, taxes, depreciation, and amortization from digital operations. The remainder of the earnings come from traditional enterprises.
MGM Resorts and Entain Deal
MGM is a major player in Las Vegas, operating casinos including the Bellagio and Mandalay Bay. On the other hand, Entain Group operates both retail and online businesses in the UK. They own brands including Eurobet, Ladbrokes, and Sportingbet.
The companies have an existing relationship. MGM and Entain are joint owners of BetMGM – one of the top sports betting and online gaming company in the US. It has plans to be in more than 20 states by the end of this year. At the present time, BetMGM online sportsbook is live in Colorado, Indiana, Iowa, Michigan, Nevada, New Jersey, Pennsylvania, Tennessee, and West Virginia.
After confirming that MGM’s proposal of the all-share takeover at a price equivalent to 1,383p per share, Entain saw its shares surge 28% to 1,449.5p. So, as the share value increased, investors believe that MGM might need to come up with a new proposal.
The Entain Group has a lot of experience in operating sports betting sites. This feature will attract MGM as it always looks to grow its BetMGM brand across the US. MGM will also be keen to cross-sell its existing land-based customers into the sports betting offer. The acquisition also improves MGM’s competition with other operators like FanDuel, William Hill, and DraftKings.
US Sports Betting Boom
The US Supreme Court’s decision in 2018 has cleared the way for sports betting to be legalized in states outside Nevada. Since then, there was a huge rise in the graph of the online sports betting industry.
As of today, online casinos, which include digital versions of slot machines and roulette, is legal in only five states. Those are New Jersey, Pennsylvania, West Virginia, Delaware, and Michigan. Whereas, the sports betting market never stopped growing. 25 states plus the District of Columbia have some sort of legal sports wagering.
Last year, Caesars Entertainment Inc. reached a $4 billion deal to buy William Hill, which is another U.K. sports-betting company. Also, Paddy Power and Betfair owner Flutter Entertainment PLC agree a £10bn merger with North America-based The Stars Group.
According to the experts, the US online betting market could be worth $20bn by 2024; and more than US$50bn over the long term, thanks to ongoing expansion.