Entain share price shoots up as MGM takeover bid is knocked back

The share price of Entain skyrocketed 28% in early trading on the London Stock Exchange after the operator confirmed it had received a takeover offer from US joint venture partner MGM Resorts.

Legacy casino giant MGM is seeking to buy the operator, formerly known as GVC Holdings, to diversify its portfolio and increase its online offering after its land-based business was negatively impacted by Covid-19.

Entain said the all-share proposal, which would be worth £8.09bn ($11.06bn), significantly undervalues the business and its prospects.

Under the terms of the most recent proposal, MGM would offer 0.6 MGM shares for each Entain share.

Based on closing prices on December 31 2020, MGM’s proposal represents a value of 1,383 pence per Entain share and a premium of 22% to Entain’s share price.

Entain shareholders would own approximately 41.5% of the enlarged group, while MGM has indicated that a limited partial cash alternative would also be made available to Entain shareholders.

MGM’s bid has the financial backing from its largest shareholder, IAC/InterActiveCorp, according to The Wall Street Journal.

The Entain board has asked MGM to provide additional information on the strategic rationale for a combination of the two companies and has urged shareholders to take no action at present.

Regulus Partners analyst Paul Leyland said: “The combination of land-based resort casino expertise and digital gambling could be a customer-led innovation win.

“But this is a big ask of two companies which barely speak each other’s language outside high level boardroom talk.

“Delivering on such strategic synergies would be extremely complex while the risks of painful adjustment could be acute,” he added.

The BetMGM JV between Entain and MGM is currently live in more than 10 US states and plans to expand into more than 20 by the end of 2021 depending on regulation at a state level.