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WHAT WE KNOW ABOUT DRAFTKINGS’ REPORTED $20 BILLION BID FOR ENTAIN
Posted on September 21, 2021
by Brad Allen
Legal Sports Report
This is a developing story and will be updated.
DraftKings has proposed a $20 billion takeover of Entain, the UK company confirmed Tuesday.
The bid was first reported by CNBC’s David Faber.
Entain said it had indeed received a “proposal” from DraftKings, to acquire it for cash and stock.
However it said there was “no certainty” a formal offer would be made.
“A further announcement will be made as and when appropriate,” Entain said in a statement. “Shareholders are urged to take no action at this time.”
What we know so far about DraftKings bid for EntainThe “roughly $20 billion” price tag marked around a 30% premium to Entain’s share price as of Tuesday morning.
The price also represented a circa 18x multiple on Entain’s trailing 12-month EBITDA.
What’s in it for DraftKings?
As Faber noted, it makes sense for DraftKings to acquire aggressively with its stock so richly valued.
It could also potentially benefit from valuation arbitrage. That is, Entain’s revenues might command a higher multiple on the US stock market than in the UK.
Online gambling expertise
DK also gains access to the online gambling expertise embedded in the Entain business.
That experience is arguably one of the key edges BetMGM and FanDuel currently have over DraftKings.
Entain, while known for sporting brands like Ladbrokes and Coral, is now more of an online casino leader, according to Eilers & Krejcik analyst Alun Bowden.
DraftKings could certainly use more of that expertise in-house, even after acquiring Golden Nugget Online Gaming.
What happens to BetMGM?
Entain owns half of BetMGM, alongside MGM. It also provides the online betting and gaming technology to the joint venture.
Would MGM allow a key rival to own half of its US sports betting business. Or could it buy out BetMGM?
That might make sense if DraftKings is simply after the Entain revenues and talent rather than the technology. DraftKings already own proprietary sports betting tech.
In that case, DraftKings could take a leaf out of the Caesars/William Hill playbook and sell off some assets it does not want. Entain is a sprawling operation with gambling licenses in 27 countries, and 24,000 staff across five continents.
Defensive acquisition?
Eilers & Krejcik analyst Chris Grove suggested DraftKings was making a defensive play.
“[This] feels like a blocker bet,” Grove wrote. “Tons of value destruction if you’re DK. But you probably get a nice rebate selling the JV interest back to MGM. Regardless of what anything thinks, you have to admire the sheer audacity and the fact that DK is in the position to make this offer at all.”
Recall, MGM tried to buy Entain earlier this year for around $11 billion, but Entain said that bid “dramatically undervalued” it.
It has been proven spectacularly correct.
How the market reacted
Entain’s share price was last up 16.6% to 2,240p. That’s a fraction below the reported 2,500p offer price.
DraftKings stock was down 4% to $54.64.
Representatives from DraftKings had not returned requests for comment at time of writing.
What We Know About DraftKings' Reported $20 Billion Bid For Entain (legalsportsreport.com) |
