Shares in Labrokes Coral owner Entain (ENT), formerly known as GVC, raced 25% higher on Monday to £14.15 after rebutting a takeover offer from its US partner MGM Resorts International.
The all-share offer values the FTSE 100 gaming and sports-betting company at approximately £13.83 per share or £8.1 billion, representing a 22% premium to the last closing price, and would result in Entain shareholders owning 41.5% of the enlarged group.
The proposal follows quickly on the heels of peer William Hill (WMH) accepting an offer from its US partner Caesars Entertainment as US firms look to grab a slice of the potential $20 billion market.
DEAL LACKS STRATEGIC RATIONALE
The board of Entain rejected the offer on the grounds that it 'significantly undervalues the company and its prospects' and lacks a clear rationale.
Shore Capital analyst Gregg Johnson concurred: ‘We struggle to understand the strategic rationale of a full tie-up with a predominantly land-based operation in MGM at this stage.’
He added, ‘the price would be consistent with c8-9x EBITDA (earnings before interest, taxes, depreciations and amortisation) for the underlying business and a further c£3.5bn 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 $20bn estimate.'
Investment director at AJ Bell, Russ Mould said, ‘shareholders may be persuaded to hold firm by the fact the offer includes only a limited cash element.’
‘Money talks even more loudly in the betting industry than it does in others and it would be no surprise if the predator were to put a bigger wad down on the table with the result that another leading British bookmaking name - in this case Ladbrokes - falls into American hands.’
