Shares in Ladbrokes and Coral-owner Entain (ENT) have plunged almost 15% to £12.06 as US casino operator MGM shocked investors by calling off takeover talks two weeks after its £8 billion bid was rejected.
The all-share offer had valued the FTSE 100 gaming and sports-betting company at approximately £13.83 per share, or £8.1 billion. But the deal would have left current Entain shareholders as minority 41.5% stakeowners in the enlarged group.
It was believed MGM would come back with another offer, but the company said today, ‘after careful consideration and having reflected on the limited recent engagement between the respective companies regarding MGM’s rejected all stock proposal… [MGM] does not intend to submit a revised proposal.’
The move comes a week after Entain’s chief executive Shay Segev announced his shock departure from the firm.
TAKEOVER ‘LACKED STRATEGIC RATIONALE’
The board of Entain had rejected the offer two weeks ago on the grounds that it ‘significantly undervalued the company and its prospects’ and lacked a clear rationale.
Shore Capital analyst Greg Johnson concurred at the time and said he ‘struggled to understand the strategic rationale of a full tie-up with a predominantly land-based operation in MGM at this stage.’
‘The price would be consistent with the circa 8 to 9-times EBITDA (earnings before interest, taxes, depreciations and amortisation) for the underlying business and a further £3.5 billion valuation for its 50% stake in BetMGM.
‘We would see such a multiple as significantly undervaluing the prospects for the group, both from its core operations and most notably the US opportunity, especially when set against peers, which appear to be discounting a much bigger eventual market than our $20 billion estimate.'
Today's events followed news that gambling rival William Hill (WMH) had accepted an offer from its US partner Caesars Entertainment as US firms look to grab a slice of the potential $20 billion domestic US gaming market.