Ladbrokes has become the latest UK bookmaker to be targeted for a takeover by an American company.
Entain, the FTSE 100 parent company of Ladbrokes, on Monday said it had received an $11bn takeover offer from MGM Resorts, a Las Vegas casino operator Entain already works with in the states. Entain rejected the offer, saying it undervalued the company, but said it was willing to listen to higher bids.
The British gambling sector has received a lot of attention from overseas rivals in the last few years. American companies in particular have targeted bookmakers such as William Hill (WMH.L) and Ladbrokes, as the country seeks to expand its sports betting and online gambling presence.
The States has been earmarked as the next big growth market for sports betting, as laws that left the sector stagnant since after the financial crisis have finally started to lift.
Since 1992, federal law has banned gambling in all but a few states, including Nevada, which is home to Las Vegas. However, three years ago the Supreme Court ruled in favour of New Jersey’s bid to introduce sports betting. The ruling allowed other states to swiftly follow suit.
As of November 2020, a total of 20 US states had legalised sports betting, with bills going through the courts in a string of others. Currently, there are just three states left where sports betting is prohibited in any form.
In the UK, gambling laws have long been much more relaxed than in the States and the sector has seen a number of technological developments in the last decade. As a result, US companies have looked to partner with UK operators to take advantage of their expertise in the area.
Recent events have meant many US firms have been tempted to just buy up the knowledge. The coronavirus pandemic, and the negative impact from Brexit negotiations, pushed down UK company share prices and made many operators cheap takeover targets.
In Ladbrokes’ case, perhaps too cheap. MGM’s approach represented a hefty 22% premium to last week’s closing price but Entain said it was still too low. Entain, which also owns brands such as Coral, Gala, Foxy Bingo, PartyPoker and Sportingbet, asked MGM to provide additional information for the strategic rationale for a combination of the two firms.
MGM had already invested around $1bn last year into its digital operations. The company, which is the operator of the Bellagio casino in Las Vegas, has until February 1 to make a firm offer or walk away under stock market takeover rules.
The move echoed a similar approach last year when Las Vegas casino operator Caesars Entertainment (CZR) bought William Hill in a deal worth £2.9bn.
Caesars had already owned a 20% stake in William Hill's US operations, which also had exclusive rights to operate sports betting under the Caesars brand. William Hill first entered the US in 2011, acquiring three betting firms at the time.
Since becoming Caesars Entertainment’s exclusive sports betting partner, William Hill opened 12 branded sports books at Caesars’ properties in Nevada, Iowa, and New Jersey.
Pending regulatory approval, the remaining sports books across the Caesars portfolio will be rebranded in the coming weeks, according to a statement by the company.
“The US was seen as a great opportunity for UK firms after a big obstacle to sports betting was removed by a court ruling in 2018,” said Russ Mould, investment director at AJ Bell, said.
“However, the ultimate result could be that UK gambling firms are swallowed up by US firms like MGM and Caesars which are desperate to add to their online footprint at a time when the pandemic is undermining business in their resorts and casinos.”
Paddy Power-owner Flutter Entertainment (FLTR.L) also runs a raft of betting partnerships in the US, including its Fox Bet platform. Flutter last year agreed a £3.1bn deal to take 95% control of US based fantasy sports and online betting firm FanDuel.
David Madden of CMC Markets said: “What started out as UK companies trying to gain market share in the US seems to have led to American companies snapping up British groups.”
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