Conditions Could Be Right For Third MGM Bid For Entain

Because of its interest in BetMGM, whatever happens to Entain is of consequence for partner MGM Resorts. A seemingly perfect set of circumstances has arisen that might prompt MGM to try to convert Entain from a partner to a part of the business.

Among those circumstances is rumored private capital interest in an Entain takeover, a lull in online casino expansion in the United States, MGM’s potential divestiture from brick-and-mortar properties, and MGM’s desire to differentiate its online casino products. While Entain and MGM have seen some of these situations before, there is one unprecedented aspect that could finally make this deal a reality.

Uncertainty at Entain has private capital on the trail

Like a predator with spotted prey lagging behind the herd, investment funds in the United Kingdom are eyeing Entain hungrily. According to Oliver Gill of The Sunday Times, Apollo Global Management and CVC Capital are reportedly interested¹ in taking over Entain.

Entain (LSE: ENT) is publicly traded on the London exchange and operates multiple online gambling brands like Partypoker. Entain also owns half of BetMGM while MGM (NYSE: MGM) holds the other half of the company.

Recent events have spurred that interest. On April 3, Entain chairman Barry Gibson announced that he would be stepping down² by September. Gibson’s departure follows the exit of former CEO Jette Nygaard-Andersen in December 2023.

Although Entain has not confirmed them, reports have the company shopping its online gambling brands in mainland Europe. That situation followed an undesirable series of regulatory results. Entain shared with investors in May 2023³ that it expects to receive a “substantial financial penalty” in Turkey and in August 2022, UK regulators handed down a record⁴ $21,148,850.00 (£17 million) fine to Entain.

A takeover of Entain would certainly be something that intrigues MGM as the new owners would effectively become MGM’s new partner in the operation of BetMGM. There are other reasons why now might be the time to strike for MGM, though.

Online casino expansion in the US takes a backseat

Also factoring into the current situation is the growth of BetMGM Casino in the US via simple expansion into new markets is off the table for the foreseeable future. Bills to legalize online casino play for real money across the country are either dormant, face long odds of passage, or are non-existent in 2024.

That lack of imminent expansion means MGM can turn its resources toward other ambitions. Simultaneously, MGM is displeased with its current price on the New York Stock Exchange. Toward improving that listing, MGM is exploring selling casinos in MA and OH.

While that would have the effect of unloading properties that MGM considers underperforming, it could also help with having the capital necessary to make another bid for Entain. Having full control of BetMGM is probably attractive enough for MGM in and of itself.

Owning 100% of any profits that BetMGM produces probably doesn’t hurt MGM’s interests. That would be even more advantageous given MGM’s desires for BetMGM. Taking over Entain itself would also fit MGM’s business patterns.

Full ownership might be pivotal to BetMGM’s strategy

As Howard Jay Klein points out for Seeking Alpha, MGM has been among the most aggressive gaming companies⁵ when it has come to acquisitions. Along those lines, MGM subsidiary LeoVegas bought a majority stake in Push Gaming in May 2023, with improving BetMGM Casino at the forefront of that move.

In March, MGM President Bill Hornbuckle stated that he wants to shift toward BetMGM Casino offering exclusive and in-house produced live dealer games. Owning 100% of BetMGM could simplify that move.

That becomes especially attractive should new US jurisdictions open the door to BetMGM Casino in the future. In turn, that further means that now might be the time to strike on an acquisition offer before more BetMGM expansion ups the price for Entain.

For BetMGM Casino players, it’s difficult to know exactly how an online casino product that is fully owned by MGM would look. At the same time, the alternatives right now could be quite a wild card.

Superior results for BetMGM Casino players a murky situation

To date, there have never been public reports of a lack of alignment between Entain and MGM regarding the direction or operation of BetMGM. As Klein further points out, Entain may have already fulfilled its purpose for MGM regarding BetMGM, too.

Thus, the potential unknowns for MGM in having a new partner, and potentially one that lacks experience in the gaming industry while simply viewing Entain as another addition to the investment portfolio, could be very unattractive.

That could be equally unattractive for BetMGM Casino players, as a hedge fund only interested in profit might stand in the way of further investment into BetMGM. Because of MGM’s experience in the gaming industry and commitment to making BetMGM a market leader, full ownership by MGM could be a superior situation for players.

Decisions about any takeover bids will ultimately be up to Entain shareholders. Some offers might be forthcoming soon.