The offer would see MGM Resorts offer 0.6 shares for each Entain share, which represents a value of �13.83 ($18.75) per share and values the operator, previously known as GVC Holdings, at approximately $11bn. We catch up with Jason Ader to get his thoughts on the potential deal.
What's your initial reaction to the potential takeover?
My general reaction is I feel like I predicted it and I'm not surprised by it. I think land-based companies need to buy online companies. The pandemic has just accelerated that philosophy and I believe there is more to come. I do see MGM Resorts and Entain coming together as I think MGM will sweeten its price and the winners will be the Entain and MGM shareholders in my view.
Entain said the $11bn valuation undervalues the company. Given its market share in the European sports betting market, would you say that was fair?
I think they'll come to a deal because you never make your highest bid your first, so I think there's room to go up and the two companies will come together, which makes sense. The UK takeover code makes the dialogue awkward but I suspect the companies are talking now. The board of Entain recognises the premium is a little below the customary premium, which will be closer to 30%. MGM has room but it also has a significant partner now with InterActiveCorp (IAC) and Barry Diller, who I think would be willing to help sweeten the deal and offer cash to Entain holders who don't want to take MGM shares, and buy more of the combined company.
How big would the merger be for MGM Resorts to seriously compete in the online gaming market worldwide?
There's not that many ways to become a serious competitor in the online gaming market. DraftKings is one and FanDuel is another, which is owned by Flutter with a gigantic portfolio, and Bet365 is private, which leaves two companies standing out vulnerable to being acquired, but in a good way. One is 888 as it's hard to imagine someone won't take a good look at that company and figure that it's a good idea to be acquired. Same for Playtech. Also both companies are undervalued relative to what the land-based companies trade at.
Would you say the pandemic has accelerated casino operators in expanding their business through such acquisitions?
The pandemic has accelerated such acquisitions for two reasons. One is they realise that online businesses are now real growing businesses and some of the companies specialising in online now have bigger valuations. Number two is that it's really tough when you have a bunch of buildings in Las Vegas and New Jersey and around the country, and nobody can go in them. So there's been this awakening that land-based businesses are vulnerable and the timing of the recovery is very uncertain, especially in Las Vegas, which is very dependent on business travel, and that doesn't look like it's coming back anytime soon.
Has the pandemic finally taught land-based operators, particularly in the US, that online gaming is an opportunity rather than a threat?
We've talked about online before and it's been a prediction of mine that online gaming will thrive during the pandemic and that land-based companies were going to end up acquiring online businesses. There are more land-based buyers than online gaming companies, so for 888 and Playtech, it's like having 10 buyers who want to buy into an apartment building but there are only two units left. The guys who own the last two units are in a pretty decent spot and that's the point to make.
There's a lot of Las Vegas and land-based companies who are scratching their heads and want to get into the online space, and they see the likes of Evolution, Kambi, GAN and DraftKings thrive, which puts everything in play. I feel 888 and Playtech are at the top of the list of potential targets.
"I think land-based companies need to buy online companies. The pandemic has just accelerated that philosophy and I believe there is more to come."
