Entain confirms $22bn takeover proposal from DraftKings

The online gambling giant Entain has confirmed that it received a takeover proposal from the US sports betting giant DraftKings

News of the proposal was first reported yesterday by CNBC’s David Faber at a price of $20bn.

Entain and DraftKings confirm proposal

Yesterday, both Entain and DraftKings have confirmed that a takeover bid had been made.

Initially, the terms of the deal were not revealed, but Entain issued an update later that day. According to the update, DraftKings made a £25 per share offer, comprised of cash and stock, however, the board rejected this offer.

DraftKings then returned with a new proposal of £28 per share on 19 September. This would be made of a cash portion of £6.30, with the rest being made up of Class A common shares. The second offer also represented a 46.2% premium on Entain’s closing share price on 20 September.

Based on the 585,591,361 Entain shares that are out there as of 30 June 2021, this would value the firm at £16.40bn ($22.40bn).

Under the City Code on Mergers, DraftKings now has until 19 October to submit a firm offer for Entain. However, Entain has noted that there may not be another bid.

In an updated statement Entain’s board said: “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. 

“The company has a strong track record of growth and runway for further significant growth as set out in the capital markets day on 12th August, with the potential for its total addressable market to grow by more than three times to $160bn. This includes its leadership position in the rapidly growing North American market through its Joint Venture BetMGM. Entain has the most diversified and regulated revenues of any of the global operators and leads the industry in player protection through its ARC programme (Advanced Responsibility and Care).

“The Board of Entain will carefully consider the proposal and a further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.”

What does DraftKings see in Entain?

By acquiring Entain, DraftKings would gain access to years and years of online gambling expertise, to help the firm expand its online footprint in the US.

Third Bridge analyst Harry Barnick said that the proposal indicates DraftKings’ willingness to “go head-to-head with Flutter owned FanDuel.”

When compared to its main competitors, FanDuel and BetMGM’s cumulative experience and knowledge of the online gambling space gives them a significant advantage over DraftKings.

Although Entain operates well-known UK sports betting brands like Ladbrokes and Coral, the business is now more of a leader in the online casino space. 

With another casino leader under its belt, DraftKings could double down on its online casino efforts, even after acquiring Golden Nugget Online Gaming.

Another bid for Entain

This marks the second major bid for the UK-based Entain this year.

Earlier this year, Entain’s joint venture partner MGM, made an approximately $11bn takeover offer. After weeks of back and forth, Entain rejected the bid, saying it “dramatically undervalued” the operation.

Looking at DraftKings’ takeover bid, it appears that MGM did in fact undervalue the firm.