MGM CEO issues Entain ultimatum should DraftKings takeover proceed

MGM Resorts International CEO Bill Hornbuckle has cast further doubt over the company’s long-term relationship with BetMGM joint venture (JV) partner Entain should the FTSE 100 operator be taken over by DraftKings in a $22.4bn deal.

Speaking at G2E in Las Vegas, Hornbuckle issued an ultimatum to Entain, suggesting the JV would not be able to continue following a successful takeover from a rival US operator.

“Ultimately, if DraftKings is able to acquire Entain, they’ll need to come to us if they want to continue to operate in the US, as they can’t do both,” Hornbuckle explained.

“We’ve had some casual conversations to date trying to tell where all this goes, but if we were able to acquire, get a larger piece and takeover BetMGM, it’s something we’d also be excited to do,” he added.

The ultimatum is a familiar strategy in US consolidation circles after Caesars Entertainment pursued similar tactics to persuade William Hill’s board of directors to accept its $3.7bn bid over a rival offer from private equity giant Apollo Global Management.

The BetMGM JV began in July 2018, with MGM and Entain agreeing 50/50 ownership and pledging to invest more than $200m in the brand, which has since risen to $450m.

BetMGM has become one of the largest sports betting in the US, vying for second spot with DraftKings behind US market leader FanDuel, and has taken the lead in igaming with around a 30% market share.

In a recent interview with EGR North America, BetMGM CEO Adam Greenblatt lifted the lid on how the relationship between the two JV partners impacts the business.

“There are things that we must work very closely with MGM Resorts on. We have a football field-sized sign for BetMGM on the side of the Luxor pyramid,” Greenblatt told EGR.

“These are the kinds of things that don’t just happen on their own. We’ve worked extensively with MGM to bring to life some of the exciting things that their assets and our collective ideas make possible.

“The other side is obviously Entain, which provides our technology,” said Greenblatt, hinting at what might have persuaded DraftKings to make a multi-billion-dollar offer for the business.

“There isn’t a separation between technology, business intelligence, customer experience, marketing, operations and the payments ecosystem,” he added.

“All of those operational processes are deeply embedded with our technology, and our technology drives our operational processes.

“We work together with Entain to define the product development roadmap on a quarterly basis and, of course, just daily operations, customer queries, outages and fixes.

“We have an amazing team that’s in Entain that are just focused on BetMGM,” Greenblatt added.

Hornbuckle’s comments suggest MGM would seek to take full control of the BetMGM brand and its technology should Entain shareholders accept a takeover approach from DraftKings.

MGM itself has been consistently linked with a second bid for Entain since an initial $11bn offer was knocked back in January.

Greenblatt said of that rejection: “We get different things from MGM Resorts and Entain and to an extent those are separate so we can deal with them in their own swim lane in terms of the corporate objectives and relationships.

“They’re not affecting us. As it stands, I have a fully funded business plan and I have MGM and Entain, recognising that the valuation of $11bn+ at stake is too important to compromise,” he added.

MGM has this year embarked on a strategy of property sales and share buybacks which have left the business with a $11.6bn war chest for future M&A purposes.

At a Bank of America conference in September, MGM Resorts CFO Jonathan Halkyard suggested the firm was looking to expand the BetMGM brand globally, again prompting speculation of a second bid.

However, MGM is yet to make a fresh approach for Entain despite the expiry of its lockout period and DraftKings is now in poll position after tabling its own takeover offer.

DraftKings now has until 19 October to submit a concrete formal bid for Entain shareholders to consider, although approval might be tricky to obtain judging by Hornbuckle’s comments on the matter at G2E.

“We hear from some of our common shareholders but it’s purely speculation,” Hornbuckle said.

“If it does come through us, we’ll take a view as to whether it is in BetMGM’s best interests and our own. If it’s not, then frankly we’re not going to do it,” he added.

Read the full interview with BetMGM CEO Adam Greenblatt in the EGR North America Quarterly Report, which can be accessed here.