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Ladbrokes owner focuses on acquiring, not being acquired

Ladbrokes owner Entain has set its sights on being an acquirer after being spurned by former bidder MGM, hoping to find growth in new markets as affordability measures eat into UK revenue.  (Liam McBurney/PA) (PA Archive)
Ladbrokes owner Entain has set its sights on being an acquirer after being spurned by former bidder MGM, hoping to find growth in new markets as affordability measures eat into UK revenue. (Liam McBurney/PA) (PA Archive)

Ladbrokes owner Entain has set its sights on being an acquirer after being spurned by former bidder MGM, hoping to find growth in new markets as affordability measures eat into UK revenue.

The betting operator was seen as an acquisition target for much of 2021 and 2022, with Bellagio owner MGM - which runs a joint venture with Entain focused on the growing US online gambling market - bidding £8.9 billion in 2021, which Entain’s board turned down. DraftKings, an American business focused on online betting, later submitted a $24 billion bid, which collapsed partly due to uncertainties around what would happen to the joint venture.

Rumours of a potential MGM bid persisted, with reports earlier this year that the casino giant was waiting until the UK Government publishes a long-delayed white paper on gambling reform.

However, last month, Entain’s shares plummeted when MGM CEO Bill Hornbuckle revealed that his business was no longer interested in buying the Ladbrokes owner.

CFO Rob Wood told the Standard that whether Entain is an acquisition target doesn’t change anything about how it does business.

“It doesn’t change anything at all,” he said. “We have our own strategy, we’re growing tremendously well. We are extremely excited by and focused on our own growth.”

That strategy involves Entain itself becoming a buyer, snapping up popular betting brands in new markets as revenue growth in its core regions like the UK runs out.

“We very much are looking to continue with more acquisitions into 2023,” he said. “We did nine last year and I would like to do  more.

“The reason is simple -  geographic expansion is important in gaining scale, and scale matters a lot.”

Wood also commented on the future of the BetMGM joint venture with MGM. Without an acquisition on the cards, there has been speculation around whether both companies will continue to be happpy with a 50% ownership stake in a business well-positioned to take advantage of US states’ efforts to legalise online gambling. Wood said there was no reason to think a change is in order, but noted that few JVs last the length of their original terms.

“It absolutely is sustainable,” he said. “Our relationship with MGM is very good. There is absolutely no requirement for change.

“I guess if you look at the history of joint ventures across the globe, do they usually last their 25-year terms? Probably not. But it’s been five years with MGM and it’s going well.”

In the UK, Entain reported a 9% decline in online revenue. Wood estimated that affordability measures - introduced in anticipation of the government’s reforms - cost Entain around 10% of its UK revenue, or roughly £110 million.

“In the first half of 2022, we were down year-on-year, but really just because of lapping lockdowns,”  he said. “What we’ve seen in the second half of the year, the UK is more flat.

“It would ordinarily be in growth, but like other large operators, we’re implementing player safety tools at the direction of the Gambling Commission, and some players are choosing to play elsewhere instead because of that.”