MGM Offers to Buy UK Gambling Group for $11B

Odds Board and Money

MGM Resorts International has made an $11B offer to buy Entain, the U.K. gambling group that owns the British brand Ladbrokes.

According to Entain, it received an £8.09 billion takeover proposal from MGM. The offer represents a 22% premium over the company’s closing price as of December 31st but it added that the offer “significantly undervalues” the company’s shares and its prospects.

Full Control of U.S. Venture

In a statement released on Monday, Entain said that its board has asked MGM to provide additional information in respect of the strategic rationale for a combination of the two companies. Under the proposal, Entain said that its investors would exchange stock for 0.6 of a share of MGM and would hold about 42% of the merged business.

A consolidation would give MGM full control of its U.S. venture with Entain. The two gambling companies are joint owners BetMGM, an online sports betting entity which operates in more than one dozen U.S. states. Entain, whose other brands include Eurobet and SportingBet, operates both retail and online businesses.

The proposed merger comes at a time when the U.S. legal sports betting market is seeing a dramatic growth. According to a separate statement from MGM Resorts International, the takeover would expand and diversify the company’s operations, product offerings, and earnings.

Sports Betting Boom

The online sports betting industry in the United States has experienced a boom since the U.S. Supreme Court repealed the 1992 Professional and Amateur Sports Protection Act in 2018. That decision paved the way for the legalization of sports betting in the U.S. and since then, a significant number of states have opened their doors to legal sports betting. With the pandemic forcing casinos and betting shops to close or operate at a limited capacity, online gambling has accelerated even more.

Per the consulting firm Vixio Gambling Compliance, the U.S. legal sports betting market is expected to quintuple to $8.24B in size in 2024. This year alone, the American Gaming Association expects 13% American adults or 35 million people to place wagers on the NFL alone.

With these developments, the U.S. legal sports betting industry has seen the consolidation of some major players. Caesars announced last September that it was buying William Hill. Flutter Entertainment, the owners of Paddy Power, Betfair, and Pokerstars, recently increased its stake in FanDuel. Meanwhile, shares of DraftKings have soared since an initial public offering last April.