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Ladbrokes-owner Entain hits all-time high on DraftKings bid as M&A fever grips sector

·3-min read
DraftKings’ Boston headquarters (Getty Images for DraftKings)
DraftKings’ Boston headquarters (Getty Images for DraftKings)

M&A fever has gripped the gambling sector after an “audacious” US takeoverbid for Ladbrokes-owner Entain left the City speculating about who could be next.

Entain’s stock hit a fresh all-time high today after it told the market it had received a 2800p-per-share approach from US fantasy sports operator DraftKings on Sunday. That values Entain at around £16.4 billion ($22.4 billion), which represents a premium of 46% on Entain’s undisturbed share price. DraftKings is offering Entain investors 630p in cash and the rest in shares.

News of the bid first broke on Tuesday afternoon but Entain did not reveal the exact level of the offer until this morning. The company, which also owns Coral and brands like Bwin, said it had received an earlier 2500p-a-share offer that was rejected out of hand.

Entain, which also owns brands like Bwin and Coral, said its board would “carefully consider” the higher offer. Shareholders have been urged to take no action.

Analysts at Jefferies said today a “fair value” bid would be 2820p a share.

Shares in Entain rocketed 18% on Tuesday afternoon and the stock climbed another 7.4% today to reach 2430p - a new all-time high.

The gulf between Entain’s current price and the offer price suggests investors see stumbling blocks. Entain’s statement suggested the board may favour keeping the company independent.

“The Board of Entain strongly believes in the future prospects of the company underpinned by its leading market positions, world class management team and industry-leading technology,” Entain said. “The company has a strong track record of growth and runway for further significant growth.”

Entain’s US joint venture with MGM could also prove problematic. The company operates a 50-50 online gambling business with the Las Vegas casino group. MGM said it would “engage with Entain and DraftKings, as appropriate, to find a solution”. MGM tried to buy Entain for $11 billion at the start of the year.

The takeover approach sparked speculation that other UK gambling operators could soon be in play.

“Wth the wave of consolidation we are seeing in the market, including 888’s recent acquisition of William Hill’s international assets, investors’ will simply be wondering: which company could be targeted next?,” said Harry Barnick, a senior analyst at Third Bridge.

Shares in 888 jumped 6.8%, Playtech gained 2.5%, and Rank Group rose 2.3%.

British gambling firms are in the takeover crosshairs after a 2018 Supreme Court ruling paved the way to legalise sports betting in the US. The move has sparked a land grab, with American casino brands rushing to win market share.

DraftKings is one of the most popular fantasy sports apps in the US and went public in New York earlier this year through a SPAC deal. Shares have struggled since then and the company is valued at just $21 billion. Barnick called the Entain bid “audacious”. The stock fell 7% on the news.

“At first glance, staid UK high street bookmakers are not an obvious fit for a US fantasy sports giant, but it’s Entain’s US sports betting venture with MGM that’s drawn DraftKings eye,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. “Rapid growth in a market share in a market which is itself exploding makes Entain hot stuff.”

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