MGM Resorts International confirmed Monday its $11 billion buyout offer of Entain PLC, the company’s European-based sports betting partner, was rejected as undervaluing the company.
However, Entain’s board asked MGM Resorts to provide additional information on the strategic rationale for combining the two gaming giants.
Entain, formerly known as GVC Holdings, is MGM’s 50-50 partner in Roar Digital, the company that operates sports betting in 10 states through BetMGM.
In a statement, MGM Resorts said it proposed an offer of 0.6 MGM shares for each Entain shares. Based on Entain’s closing price on London Stock Exchange last Thursday, MGM said the offer was a 22% premium to Entain’s share price.
“MGM believes both its proposal and the strategic rationale for the combination are compelling and looks forward to engaging with Entain on this basis,” the company said in its statement.
The Wall Street Journal first reported on MGM’s takeover approaches on Sunday before Entain disclosed details in a regulatory filing.
MGM confirmed IAC/InterActiveCorp, the company’s largest shareholder which spent more than $1 billion last summer to acquire a 12% stake, “would potentially fund a portion of the partial cash alternative through a further investment in MGM.”
IAC, which is controlled by media mogul Barry Diller, said in August the potential for MGM’s online gaming business drove the investment thesis.
Diller, IAC’s chairman, called MGM’s revenues from online gaming and sports betting, “a portion of its revenue so small that it rounds down to zero.” Diller and IAC CEO Joey Levin were added to MGM’s board last year.
Under the terms of MGM’s proposal, the company said Entain shareholders would own approximately 41.5% of the combined business.
Among the benefits of the merger, according to MGM Resorts, include delivering full control of the BetMGM business to leverage the U.S. iGaming and sports betting opportunities, and position the company as a global gaming operation across online and retail businesses.
Entain operates several European online gaming brands, including bwin, PartyPoker, Ladbrokes, Coral, and FoxyBingo. MGM Resorts operates more than two dozen properties in six states, including 10 properties on the Las Vegas Strip. MGM also has a joint venture in Macau.
MGM said in the statement, “there can be no certainty that any offer will be made for Entain.”
In its own statement, Entain offered similar comments as MGM.
“Entain has informed MGM Resorts that it believes that the proposal significantly undervalues the company and its prospects,” according to the statement. “The board has also asked MGM Resorts to provide additional information in respect of the strategic rationale for a combination of the two companies.”
Shares of MGM Resorts closed at $29.72 on the New York Stock Exchange Monday, down $1.79 or 5.68%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. Follow @howardstutz on Twitter.