MGM’s biggest shareholder pledges up to $1bn for new partial cash offer for Entain
IAC sends non-binding letter of intent to MGM pledging huge investment with new bid imminent
MGM Resorts International’s largest shareholder InterActiveCorp (IAC) has pledged to invest up to $1bn to help fund a new partial cash offer for Entain after previous bids were unsuccessful.
Details of the investment pledge were revealed late on Friday, with MGM confirming a non-binding letter of intent from IAC indicating its support for the “compelling” £8.09bn ($11.06bn) takeover of Entain – the FTSE 100 gambling operator formerly known as GVC.
The initial all-share bid confirmed a limited cash alternative could be made available to Entain shareholders as an additional incentive.
IAC has indicated that it would be willing to consider funding a portion of this partial cash alternative – up the value of $1bn – through a further investment in MGM “due to IAC’s confidence in MGM and its prospects”.
IAC owns 59,033,902 shares in the US casino heavyweight.
No timescales have been confirmed for the payment of this additional investment amount if accepted by MGM.
“IAC has to date invested approximately $1bn in MGM with an initial investment thesis of accelerating MGM’s penetration of the $450bn global gaming market,” MGM said.
“IAC notes in its letter of intent that IAC continues to strongly support this objective for MGM whether or not a transaction with Entain is consummated,” the firm added.
Detailing the strategic rationale behind the acquisition, IAC said an “alignment of incentives and goals” created by combining the two businesses would accelerate the growth of the BetMGM brand, which is currently operated on a joint venture basis between the two companies.
“A strong balance sheet and robust annual free cash flow generation would allow the combined business to aggressively pursue its growth objectives such as US online market penetration, new development in key international gaming markets, future M&A and returning capital to shareholders,” IAC concluded.
Elsewhere, Asia-based investment firm Snow Lake Capital this week called on MGM Resorts to divest 20% of its stake in MGM China to external Chinese investors to jumpstart a fresh bid for Entain.
In a six-point open letter to the casino operator, Snow Lake claimed a sale to a “leading Chinese consumer internet or travel and leisure company” would be in the long-term best interests of the firm.
Snow Lake, which manages funds accounting for 7.5% of shares in MGM China Holdings Limited, is the largest public shareholder in its China-focused business. MGM Resorts owns a majority stake in the business.
“We believe such a transaction will create a win-win transaction for all parties involved and deliver significant shareholder value to both companies,” Snow Lake said.
“We think an acquisition of Entain makes tremendous sense for MGM Resorts International as the US online market represents a key long-term growth opportunity,” Snow Lake wrote.
“Entain’s in-house technology platform meshes very well together with MGM Resorts International’s prime resorts assets and its 34 million strong M life Rewards database.
“The proceeds from reducing the MGM China stake will provide MGM Resorts International with much-needed cash to continue to aggressively pursue the M&A and reduce the potential dilution MGM Resorts International shareholders will face.