DraftKings Gambit

When the metaphors get mixed and the similes collide, one knows that excitement is in the air and something big, very big, is afoot: perhaps a multi-billion-pound take-over of a FTSE 100 gaming giant by a Vegas-based megalith?

Latest news from MGM Resorts’ stunning £8.1bn (US$10.99bn/€8.99bn) offer for Entain–formerly GVC, and owners of legacy Ladbrokes and Joe Coral brands—tells us that the move is good but too low; so says the UK company’s third biggest investor, Aberdeen Standard.

Amid what can only be termed a US online sports and iGaming gold rush, MGM is seriously undervaluing Entain, asserts Aberdeen’s Investment Director Wes McCoy.

“If you’re going to buy this company from my fund holders, then the conversation is going to have to start with: ‘This is a great company, now let’s talk.’ This offer is not in the right zip code, or postcode,” says McCoy.

McCoy’s stirring appeal to talk serious turkey is approved by most City of London deal watchers.

The valuation of Entain has already been rejected as too low by the board. And the company’s shares have surged well above MGM’s cash and shares offer.

Insiders predict that MGM, owners of the Bellagio Resort in Las Vegas, will up its bid significantly before the end of February deadline.

Despite protestations to the contrary, it’s widely assumed that MGM–which already has a joint-venture in the US with Entain–now wants full control of the British company for their world-class online sports and iGaming expertise: not least to take-on the runaway success of rivals DraftKings.

McCoy concurs.

“The US is going to be the biggest [online gaming] market in the world, the biggest regulated market in the world. I don’t understand why [we can’t] use a DraftKings mentality when thinking about the value of Entain,” he argues.

Another top-level source cautions: “If MGM don’t do the deal right now, they will never be able to afford this business [Entain].”

Referring to the legendary moment when Blockbuster–at the time kings of video rental–turned down an offer to buy the nascent Netflix for a “trifling” US$50m (£36.85m/€40.9m), the source reminds us:

“Blockbuster definitely said that Netflix was no good. That’s the closest analogy in my mind. This is Blockbuster putting in a bid for Netflix before it hits scale.”

For sure, as the new decade dawns MGM-Entain is the biggest story in town.

And it’s one movie that no gaming aficionado will want to miss.

Watch this space.