A bidding war between MGM and private equity players is said to be in the offing, according to M&A traders: the starting price is from north of 800p a share versus yesterday’s close of 530p.
Given that shares of FTSE 100 company Entain are near multi-year lows, it does not necessarily feel that this could be the next UK blue-chip takeover. However, last month the company reaffirmed full-year guidance as key markets for the Ladbrokes and Coral owner in the UK and Australia performed well in the first quarter.
That said, the key in terms of M&A here is the BetMGM JV with MGM Resorts International (NYSE: MGM). This has achieved profitable growth, something which points to the opportunity for MGM to make a bid for Entain, given the low share price, and the strategic value of the JV to the company.
It suggests a classic sum of parts breakup for Entain, something which would no doubt be attractive to the likes of private equity players such as CVC and Apollo. Therefore, it should mean that MGM has to make a move on Entain to avoid the company being asset stripped by a third party.
What should be noted is that ENT has been in the frame as a bid target before, with Draftkings in 2021 offering £16bn, as compared to the current market cap of £3bn. Indeed, that year ENT also said no to an £8bn from MGM itself. In colloquially terms the powers that be at ENT must be kicking themselves. At the same time for MGM, and its $9bn market cap, ENT is, if not as cheap as chips, much more affordable.
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The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
