A significant offer
DraftKings has made an offer worth $20bn to take over UK-based gambling group Entain. CNBC first reported about the offer on Tuesday. Most of the offer is said to be in the form of DraftKings stock, as well as cash. On the back of these reports, Entain stock rose about 17% for the day, while DraftKings stock was down about 5%. This reported offer is worth about ￡25 ($34.16) per share, a 30% premium over Entain’s closing stock price on Monday.
In advance of the news, Entain’s enterprise value was roughly $18bn. As part of a London Stock Exchange filing, the Entain board confirmed that it had received a proposal from the US-based DraftKings. While this filing mentioned the offer was a combination of stock and cash, it did not provide any specifics about the bid price. The filing stated: “A further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.”
A month to make formal bid
This attempt by DraftKings to take over Entain comes not long after the UK-based gambling group rejected an all-stock offer worth about $11bn from MGM Resorts International. Giving a reason for the rejection of this bid, Entain stated that the offer was significantly undervaluing the group.
MGM will engage with Entain and DraftKings, as appropriate, to find a solution”
Entain already had a relationship with MGM Resorts, with the two companies being partners in the US-focused BetMGM online gambling brand. MGM does not have any involvement in the offer from DraftKings to buy Entain. However, consent from MGM would be necessary when it comes to Entain’s US assets. An MGM Resorts statement on the matter said: “MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”
DraftKings has not yet publicly commented on its own bid. The company has until October 19 to make a firm offer as per the City Code on Mergers.
Ongoing consolidation of the gambling sector
DraftKings is one of the leaders in the burgeoning online gambling space in the United States. It has sportsbooks, online casinos, and daily fantasy sports offerings operational in numerous states. The company only went public in April 2020 following a special purpose acquisition company (SPAC) reverse merger.
In the first half of 2021, Entain’s revenue rose 12.2% up to ￡1.77bn ($2.42bn). It also saw its profits more than double. The majority of its revenue now comes from its online operations. In comparison, DraftKings’ revenue for the first half of 2021 was $609.8m, a 282.3% year-on-year rise.
would control about 40% of the US market, overtaking Flutter Entertainment
DraftKings now appears to be the latest operator focusing on the consolidation of the gambling sector. US-based operators appear to be looking at overseas expansion, in addition to leveraging the experience of long-running operators in other markets. According to RBC analysts, a combined DraftKings and Entain entity would control about 40% of the US market, overtaking Flutter Entertainment. DraftKings has also recently committed to acquiring Golden Nugget Online Gaming from Fertitta Entertainment in an all-stock deal worth about $1.56bn.
In a similar type of deal, Caesars Entertainment bought UK-based William Hill last year in a transaction worth ￡2.9bn ($3.96bn). Caesars is in the process of selling William Hill’s non-US assets to 888 Holdings for about ￡2.2bn ($3bn).