Shares in Entain PLC (LSE:ENT) did not take off after the betting giant said it was chewing over an improved potential bid from Draftkings Inc (NASDAQ:DKNG), despite the potential for a bid battle emerging with the UK company’s US partner MGM Resorts International (NSX:MGM).
At Citigroup, analysts said it was “game on”, with a combination between DraftKings and BetMGM implying a 44% share of the US iGaming market, a sports betting share of around 19% and total market share of circa 37%.
“This could potentially raise antitrust concerns, although the nascent nature of the market may be a mitigating factor,” Citi said.
Jefferies analysts suggested DraftKings buying Entain’s non-US assets and MGM Resorts buying out the BetMGM joint venture “would suit the stated strategies of both business: DKNG desires international exposure and MGM seeks digital growth”.
Since proposing its 1,383p offer (at 0.6 of an MGM share per Entain share) in January, MGM has accumulated more cash on its balance sheet, Jefferies noted, with US$5.6bn at the end of June and another US$6.5bn cash incoming from recent asset sales.
They added that while Entain has said there is no similar ‘poison pill’ as Caesar had William Hill, the shares/cash mix of DraftKings’ offer could be an issue for some shareholders.
Analyst Laura Hoy at Hargreaves Lansdown added: “While Entain confirmed it would mull the proposal over, there’s no guarantee that a deal will go ahead. Even if the offer is accepted, the usual regulatory scrutiny could be further complicated by antitrust concerns due to BetMGM, Entain’s joint venture with US Casino operator MGM.
“We suspect that BetMGM is a big part of the reason DraftKings is interested at all…But MGM will have a hand in negotiating the terms of the deal, which could ultimately put DraftKings off following through. There’s also a chance DraftKing’s bold move could push MGM to make another offer for Entain, though we think this possibility is unlikely considering it would require MGM to substantially increase its former offer.”
She said that Draftkings would probably spin off or sell any unwanted UK assets, as seen with Caesars Entertainment and William Hill recently.
With consolidation in the betting space having been taking place for years over this side of the pond, analyst Neil Wilson at Markets.com was one of those wondering “why are these takeovers not going in the other direction?”
Entain’s market valuation is just below US$20bn while Draftking’s is close to US$23bn, which is not quite the same difference but may remind some long-term investors in the UK company, which as AIM-listed GVC Holdings bought FTSE 250-listed Bwin.Party for a market value of more than double its own at the time.