Entain shares reach record high as MGM takeover bid speculation builds
Investors join their own dots after MGM Resorts offloads Las Vegas-based retail assets for $4.4bn
Shares in Entain jumped to an all-time high of 1,955p on 5 August on speculation that MGM Resorts is readying another takeover bid for the FTSE 100 operator.
MGM, which is a joint venture partner of Entain in the US via BetMGM, cashed in to the tune of $4.4bn after selling a group of its Las Vegas-based retail assets to VICI Properties via its MGM Growth Properties subsidiary (MGP).
The transaction has freed up $11.6bn of domestic operations liquidity for MGM to return value to shareholders and solidify its balance sheet, potentially via M&A.
Entain’s stock price climbed 8% yesterday and a further 2% today to an all-time peak off the back of the news as investors reached their own conclusions and it became the top performing stock on the FTSE 100 index.
MGM said in a statement: “Since the company formed MGP in a milestone transaction in 2016, the company and MGP have successfully executed multiple transactions providing for significant cash proceeds the company has used to strengthen its balance sheet, return capital to shareholders and fund substantial investments in significant growth opportunities.
“Among these investments is the formation of BetMGM, which has now solidified its position as a leader in the igaming and sports betting market in the US.
“These efforts also favourably positioned the company to weather the unprecedented crisis created by the Covid-19 pandemic and allowed the company to emerge in a position of strength as the economy continues to rebound.”
In January, MGM Resorts launched an $11bn (£8.09bn) bid to acquire Entain which was rebuffed as it “significantly” undervalued the business, according to Entain.
MGM walked away from the process following the rejection, but speculation is rife that it could return with another bid as its future strategy will focus on online growth in the US – hence the multi-billion-dollar land-based sell-off.
Any new offer for Entain would need to be substantially higher though, according to city analysts due to the FTSE 100 operator’s share price movements since the initial offer when it stood at around 1,400p.
The initial offer at 0.6 MGM shares per Entain share would only be worth 1620p now, while Entain is priced at 1955p per share on the London Stock Exchange at the time of writing.
One analyst speaking on the condition of anonymity told EGR: “They certainly have the firepower to make a new offer but that doesn’t necessarily mean they’ll lose financial discipline.”