Another bid for Entain could be difficult for MGM to execute

Posted: October 5, 2022, 2:44 a.m.

Last update on: October 5, 2022, 04:37h.

The deteriorating global macroeconomic environment is restricting financing opportunities, indicating that a pause in large-scale mergers and acquisitions could result.

MGM Entain
MGM Grand on the Las Vegas Strip, seen above. MGM Resorts could face difficulties if it tries to buy Entain again. (Image: MGM Resorts)

Some analysts believe this is relevant to suitors eyeing gaming industry targets, including MGM Resorts International (NYSE: MGM), which may revisit a takeover bid for Entain Plc (OTC: GMVHY). Even with the US dollar ranked as the world’s best-performing major currency this year and the struggling pound, the Bellagio operator would still likely need to secure significant funding for another run at the Ladbrokes owner. It could be a risky proposition with rising interest rates and lenders nervous about the economy in general.

If you want to go for money to buy something right now, it’s next to impossible no matter what market you’re in,” said mergers and acquisitions expert Paul Richardson in an interview with online gambling business. “Leveraged finance is pretty much a driver and the costs are high right now – then that makes it more difficult.”

In January 2021, the Las Vegas-based casino operator offered $11.06 billion for Entain. The UK bookmaker said the offer was not adequate. MGM did not publicly increase its offer, and the talks ultimately fell through.

Next steps for MGM, Entain

MGM has made no secret of its desire to control BetMGM – the iGaming and sportsbook entity which is a 50/50 joint venture between the casino company and Entain.

Likewise, the Las Vegas-based company is showing a willingness to strike deals and has said it may consider future acquisitions. That said, there are a few issues that make acquiring Entain difficult. First, last October, Entain declined a $22.4 billion offer from DraftKings (NASDAQ:DKNG). Some analysts see that as the bar, making it unlikely that Coral’s owner will consider a takeover bid at a lower price.

Second, Entain is on its own wave of acquisitions — an acquisition that some industry observers say makes it difficult for a suitor to acquire the company. Some of Entain’s recent purchases may be of interest to MGM. Others, not so much.

Then there’s the question of the possibility of going into debt as rates rise and MGM Sports’ junk credit ratings.

“If MGM were to try to buy Entain today, they would still have to find a lot of money to pay for it – I would say that would be a challenge. They clearly have a good relationship with banks in the United States. But they would need a lot of funding for their approach,” Richardson said. online gambling business.

Don’t expect a lot of UK gaming mergers and acquisitions

Although the British pound is in a downward spiral against the greenback, other British gambling companies are unlikely to be on the radars of US-based contenders.

As Richardson noted in the interview, FanDuel’s parent company, Flutter Entertainment (OTC:PDYPY), is too big to attract credible takeover bids. Likewise, Bet365 is not considered a candidate for a takeover bid.

888 Holdings has been the subject of takeover speculation, but its debt burden could be off-putting to suitors. Gaming technology company Playtech was nearly acquired by Aristocrat Leisure. But that deal fell apart earlier this year.