MGM Resorts ditches plan for £8bn takeover of Ladbrokes owner

A Ladbrokes shop sign
A Ladbrokes shop sign (PA Wire)
14:56pm, Tue 19 Jan 2021
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US casino giant MGM Resorts has walked away from an £8 billion takeover of Ladbrokes owner Entain after its approach was rejected.

Shares in the FTSE 100 gambling firm – formerly called GVC – plunged as much as 20% on Tuesday after MGM ditched its plans.

Las Vegas-based MGM said it would not increase its approach or make a firm offer for Entain “after careful consideration and having reflected on the limited recent engagement between the respective companies regarding MGM’s rejected all stock proposal”.

It comes a week after Entain chief executive Shay Segev announced his shock departure after less than six months in the role and amid the bid battle.

Entain – which also owns brands including Coral, Foxy Bingo and Sportingbet – rebuffed MGM’s £8.09 billion proposal earlier this month, saying it “significantly undervalues the company and its prospects”.

We expect (Entain's) share price to reflect the strong underlying momentum... offset by some uncertainty around the recently announced chief executive departure

MGM had until February 1 to make a formal bid or walk away.

Under the approach, Entain investors would have received 0.6 shares for each share they own – representing a value of 1,383p per share – up 22% on the company’s closing price on December 31 2020.

It would have left Entain shareholders owning 41.5% of MGM.

Following MGM’s decision, Entain gave assurances that it has a “clear growth and sustainability strategy, backed by leading technology, that it is confident will deliver significant value for stakeholders”.

It will continue to “work closely” with MGM in the US on their BetMGM joint venture, Entain added.

Entain will give a trading update on January 21.

The group has been thrust into the limelight since the approach was revealed at the start of January, followed soon after by Mr Segev’s surprise departure plans.

The outgoing chief executive – who was promoted last July to replace long-serving boss Kenny Alexander – is leaving to become co-chief executive at sports streaming business DAZN.

Mr Segev has a six-month notice period and will remain as chief for the duration or until a new boss is hired.

MGM and Entain have partnered in the US following a Supreme Court ruling in 2018 that allowed online sporting betting to take place, while gambling laws remain under state-by-state control.

Since the deregulation in America for online sports betting, a number of US casino operators have turned to UK bookies to use their experience in online gambling.

The ruling said that foreign businesses looking to cash in on the changes would need to partner up with US-based casinos.

In September, MGM rival Caesars Entertainment struck a 3.7 billion US dollar (£2.7 billion) deal to buy UK-based William Hill.

Analyst James Wheatcroft at Jefferies said the MGM approach had “flagged the significant opportunity in the US” for the BetMGM tie-up.

He added: “We expect (Entain’s) share price to reflect the strong underlying momentum… offset by some uncertainty around the recently announced chief executive departure.”

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