MGM Discusses Ways to Win Over Entain Investors With Takeover Bid

MGM Resorts International is pushing ahead with its takeover attempt of Entain Plc and discussing ways to make its $11 billion offer more appealing, according to people with knowledge of the discussions.

The Las Vegas-based casino operator made an all-cash offer late last year for Entain, the owner of bookmaker Ladbrokes, and followed up in recent days with a higher, all-stock bid. But the terms have been criticized for undervaluing the company. Discussions now include potentially sweetening the offer to include a mix of cash and stock, said the people, who asked not to be identified because the deliberations are private.

MGM has almost $4.6 billion in cash on its balance sheet after a series of asset sales. Its largest shareholder, Barry Diller’s IAC/InterActiveCorp, has indicated it could fund part of a cash contribution by investing more in MGM, according to a statement Monday. IAC owns just under 12% of the casino giant, according to data compiled by Bloomberg.

Entain, which also owns the betting site Bwin, acknowledged Monday that it received an offer of 0.6 MGM share for each of its own, the equivalent of 1,383 pence a share. The company said the proposal “significantly undervalues” the business, but left the door open for further discussions. Entain’s board asked MGM to provide additional strategic rationale for the merger.

Shares of Entain fell 17 pence to 1,403 pence Tuesday in London, but continue to reflect investor expectations of a higher offer. The stock rose 25% on Monday after news of the offer broke.

“It’s gonna happen -- they will raise the price,” said Jason Ader, a casino investor who helped sell a business to Entain several years ago. “They’re the perfect buyer.”

A deal would combine the largest operator of casinos on the Las Vegas Strip with Entain, an online-focused business that has grown dramatically in recent years through acquisition. The company recently changed its name from GVC Holdings.

Management, including Entain’s new chief executive officer, Shay Segev, isn’t perceived to be an obstacle to merger discussions, and may play an ongoing role at the combined companies, said the people.

A representative for Entain said management and board were unanimous in the views expressed by the company Monday.

MGM and Entain have been partners since 2018 in a joint venture that offers online casino and sports betting in the U.S. That relationship, which MGM has described as exclusive, could make it difficult for another bidder to make an offer for Entain without giving MGM the opportunity to unwind the partnership.

Unlike with a similar combination between U.S. casino giant Caesars Entertainment Inc. and British bookmaker William Hill Plc, MGM isn’t interested in selling the Ladbrokes betting shops, which are a fixture in cities across Great Britain.

©2021 Bloomberg L.P.

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