Entain confirms $22bn takeover proposal from DraftKings
Having not revealed the terms of the offer in its initial statement, Entain then issued an update later on Tuesday 21 September. This revealed that a £25.00 per share offer, comprising cash and stock, had been rejected by its board.
DraftKings had then returned with a new proposal of £28.00 per share on 19 September. This would comprise a cash portion of £6.30, with the rest made up of Class A common shares, and represented a 46.2% premium on Entain’s closing share price on 20 September.
Based on the 585,591,361 Entain shares in issue as of 30 June 2021, this would value the business at £16.40bn (€19.23/$22.40bn)
Under the City Code on Mergers, DraftKings now has until 19 October to submit a firm offer. Entain has noted that no such bid may be forthcoming.
The updated statement saw Entain’s board talk up the operator’s prospects as an independent business. Its future opportunities, it said, were “underpinned by its leading market positions, world class management team and industry-leading technology”.
“The company has a strong track record of growth and runway for further significant growth as set out in the capital markets day on 12 August, with the potential for its total addressable market to grow by more than three times to $160bn,” the board explained. “This includes its leadership position in the rapidly growing North American market through its Joint Venture BetMGM.
“Entain has the most diversified and regulated revenues of any of the global operators and leads the industry in player protection through its ARC programme (Advanced Responsibility and Care).”
Earlier this year, Entain was the subject of a rejected $11bn bid from MGM Resorts International, its joint venture partner for the US-facing BetMGM betting and igaming business. Entain at the time said the bid undervalued its business, and MGM opted against making a higher offer.
Harry Barnick, senior analyst at Third Bridge, said the deal is likely to be one step in a wave of further consolidation in the market, with more high-profile deals set to follow.
“Draftkings’ audacious bid indicates it’s willingness to go head-to-head with Flutter-owned FanDuel,” he said.
“As shareholder’s mull over the deal, three key questions remain. What will happen to the MGM partnership under DraftKings ownership? Could we see a counter offer lead to a bidding war?
“Then with the wave of consolidation we are seeing in the market, including 888’s recent acquisition of William Hill’s international assets, investors’ will simply be wondering: which company could be targeted next next?“
MGM has since revealed that it has no intention of selling its stake in BetMGM.
In the first half of the year, Entain saw its H1 2021 revenue grow 12.2% to £1.77bn (€2.09bn/$2.45bn), and profit more than double. However, it did see a 34% drop in revenue from Germany due to the country’s transition regime for online gaming.
Almost all of Entain’s net gaming revenue – at £1.59bn, up 28.4% from 2020 – was made online. After VAT, this total was £1.56bn.
DraftKings, meanwhile, raised its revenue guidance in H1 after recording half-year revenue of $609.8m, up 282.3% from 2020. Soon after publishing its H1 results, the operator announced a deal to acquire 100% of Golden Nugget Online Gaming (GNOG) from Fertitta Entertainment, Inc in a $1.56bn all-stock deal.
The combined group is therefore likely to bring in annual revenue in excess of $6bn.
This year also saw Entain appoint Jette Nygaard-Andersson as its new chief executive, replacing Shay Segev.