A Ladbrokes outlet, which is owned by Entain, in London, Britain. Picture: Picture: REUTERS/SIMON DAWSON
A Ladbrokes outlet, which is owned by Entain, in London, Britain. Picture: Picture: REUTERS/SIMON DAWSON

London — Online gambling company Entain  has dismissed a £8.1bn bid from MGM Resorts International, in what would be the largest in a recent wave of trans-Atlantic betting mergers.

London-based Entain said the offer, which would give the Las Vegas casino operator broader access to fast-growing online betting markets, undervalues the company. Under the proposed terms, Entain investors would receive 0.6 of a share of MGM for every share they hold, according to a statement on Monday. MGM may also offer a “limited partial cash alternative” to the British company’s shareholders, who would own about 42% of the combined business.

A representative for MGM didn’t immediately respond to a request for comment outside regular business ours.

At 1,383p per share, the bid is a 22% premium to Entain’s closing share price on Thursday. The company’s shares jumped 28% to 1,410.50p  in London, the biggest intraday gain since 2009. The offer tops an earlier all-cash bid made late in 2020, people familiar with the matter had said.

The gaming industry is undergoing a wave  consolidation after the US legalised sports betting in 2018. Las Vegas-based casino giant Caesars Entertainment  is taking over the UK’s William Hill, while Flutter Entertainment, headquartered in Dublin, is buying a stake in US bookmaker FanDuel and in 2020 completed a deal for the Stars Group.

MGM, the largest casino operator on the Las Vegas Strip, formed a joint venture in 2018 with Entain, formerly known as GVC Holdings, to capitalise on the growth of online betting in the US. The partnership got off to a slow start as the venture had some disagreements over strategy.

A merger would consolidate control of the company’s online betting operations at a time when the industry is seeing dramatic growth. The US sports betting market alone is expected to quintuple in size to $8.4bn by 2024, according to the consulting firm Vixio Gambling Compliance.

“We think that the market has not yet recognised the upside potential and momentum in Entain’s joint venture,” Jefferies analyst James Wheatcroft said in a note to clients on Monday. If the market valued the British company at the same level as its US peer, DraftKings, Entain could expect a valuation of about 1,975p per share, he said.

Entain said it has asked MGM for more details on the strategic rationale on the combination and has asked shareholders to take no action.

Entain shares gained 28% in 2020, giving it a market value of £6.6bn. MGM shares fell 5.3% in 2020.

Bloomberg

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