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DraftKings, the fantasy sports and betting company, has made a £ 18.4 billion offer for Entain, setting the stage for a battle with the British gambling group’s joint venture partner in the United States, the MGM casino giant.
London-listed Entain said on Tuesday it had received two takeover bids from its US rival – a stock and cash offer at £ 25 per share, which was rejected, and a second at £ 28 per share, of which 6, £ 30 would be in cash.
DraftKings confirmed it made the approach but declined to comment further.
Entain has said it will “carefully consider” the latest offer, which values the company at £ 16.4bn ahead of the inclusion of £ 2bn in net debt. The terms proposed by DraftKings would offer 22% in cash and the remainder in new Class A common shares of the US group.
Shares in the UK company were valued at around £ 18 before news of the deal was first reported by business news channel CNBC on Tuesday. Shares have since jumped almost 20% to £ 22.61.
DraftKings shares fell more than 7% in trading in New York, closing at $ 52.77 on Tuesday.
“This is a major signal of DraftKings’ intention to become a global online gaming powerhouse,” said James Kilsby, US managing director of industrial research firm Vixio. “MGM has always been Entain’s alleged suitor and that really put the cat among the pigeons.”
Entain rejected an £ 8 billion takeover bid from MGM in January.
FTSE 100, which owns the Ladbrokes and Coral betting brands, has a joint venture with MGM to offer sports betting in the United States, which could be at risk if DraftKings’ offer is accepted.
MGM said in a statement that “any transaction whereby Entain or its affiliates own a competing business in the United States would require the consent of MGM.” He added that control of the BetMGM joint venture was “an important step towards achieving [MGM’s] strategic objectives ”and that he would hold talks with DraftKings and Entain.
Bill Hornbuckle, Managing Director of MGM, told an investor conference in Las Vegas last week: “We are criticizing ourselves for giving up 50% of[BetMGM]. . . And so yes, we would like more.
After private equity firm Apollo Global Management attempted to buy out William Hill last year, Caesars, the UK bookmaker’s US joint venture partner, threatened to pull out if another group bought the company.
David Katz, analyst at Jefferies, noted that MGM could come back with an offer on Entain since it had “significantly improved its capital structure” after the sale of real estate assets in a $ 17 billion deal on last month.
Earlier this year, BetMGM said it plans to have operations in 20 states covering about 40% of the US adult population by the end of the year, as governments in crisis-affected states move on. are rushing to take advantage of the tax revenues generated by gambling. The company predicts that its revenues will increase from $ 178 million in 2020 to $ 1 billion in 2022.
DraftKings has become one of the most successful companies to be publicly traded through a specialist acquiring company and is widely regarded as the catalyst for the subsequent boom in Spacs.
The company’s market value has more than six-fold since its first listing of $ 3.3 billion in April last year thanks to a merger with Diamond Eagle Acquisition Corp, a Spac run by Hollywood veterans Harry Sloan and Jeff Sagansky.
RBC analysts estimated that a combination of DraftKings and Entain would control about 40 percent of the US market, overtaking market leader Flutter.
DraftKings has until October 19 to make a firm offer.