Shares in Ladbrokes owner Entain (ENT) surged 6% to a new all-time high of £24 on Wednesday after the company said it had received a second takeover approach from US fantasy sports company DraftKings at £28 per share.

Todays share price spike takes the two-day gain to 24% while the latest offer price represents a 46.2% premium to the undisturbed share price.

The board of Entain rejected an earlier approach by DraftKings pitched at £25 per share and follows a takeover attempt by its joint venture partner MGM Resorts in January at £13.83.

Management said it will ‘carefully consider’ the latest proposal and urged shareholders to take no action. The offer consists of £6.30 in cash and the rest in new Drafkings shares, with the share ratio fixed at the price prior to the first agreed public announcement.

EXPERTS VIEW

Investment bank Jefferies said: ‘Taking a middle-of-the-pack take-out multiple for Entain's ex-US business (13.5x EV/EBITDA: recent range of deals 11.5x-15x) and putting a DraftKings EV/sales multiple on its US business (14x FY22E) would imply a fair value of 2,820p for Entain.

One possible wrinkle in a takeover scenario is Entain’s US joint venture with MGM Resorts with the company saying any transaction would require its consent.

The company commented, ‘MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.’

Numis said it believes that DraftKings' approach could persuade MGM Resorts to return with an improved offer and that ‘bid speculation should underpin the shares’.

Numis suggested that if MGM Resorts were to bid on the same terms as before, it implies a price of £19.15, but with a stronger balance sheet and around $11 billion of liquidity it could afford to bid higher.

However, the fact that the shares are still trading around 16% shy of DraftKings new offer suggests investors are sceptical of a bidding war.

One thing is clear at this stage, and that is shareholders have done very well over the last 18 months with Entain’s shares up over six times since the depths of the Covid-19 related March 2020 lows.

Today’s news spurred interest in other gambling companies with 888 Holdings (888) up 7% and Flutter Entertainment (FLTR) gaining 4%. Meanwhile shares in DraftKings have dropped 13% in the last two days as investors gave the proposed deal the cold shoulder.

READ MORE ABOUT ENTAIN HERE

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Issue Date: 22 Sep 2021