Entain: Feeding Frenzy or Break-up To Make-up?

BetMGM, bwin, Coral, Ladbrokes, PartyPoker, Sportingbet, STS, et al; who will buy these storied brands? That’s the question being posed by gambling industry insiders as a circle of fearsome financial sharks, corporate raiders, investment funds–call them what you will–hunt-down the seemingly mortally-wounded gambling leviathan, Entain.

The value of FTSE100 Entain, one of Britain’s biggest betting companies, has surged on the London market following the knifing and displacement of the group’s Chair Barry Gibson, a man who had championed the integrity of the company, beating-back several take-over attempts during his four-year tenure but who finally buckled under the pressure of so-called activist shareholders, the sacking of CEO Jette Nygaard-Andersen and a massive £615 million (US$780.86m) sanction from UK financial authorities for historic money laundering breaches in Turkey.

Now, according to highly-placed, but unnamed, sources within the group, Entain is seriously entertaining sell-offs, divestiture; even dismemberment.

Top of the list has to be BetMGM, Entain’s US sportsbook and iGaming joint-venture with mighty MGM Resorts International.

Big Bill Hornbuckle, MGM’s lord of all he surveys, has made no secret of wanting full control of BetMGM, launched in 2018 and now finally, after massive investment, on the threshold of going US$500 million (£393.89m) EBITDA-positive by 2026.

Corporate Meltdown

Hornbuckle and US competitor DraftKings, who made an audacious US$22 billion (£17.33bn) bid for Entain in October, 2021, were both beaten-off by Gibson.

But Gibson is now gone and Entain, revenue £4.77 billion (US$6.05bn) last year, is without a permanent CEO, as the hunt to replace the unpopular Nygaard-Andersen, defenestrated in a boardroom coup in December, continues.

Entain’s PartyPoker, Foxy, Eurobet and Enlabs brands–even storied Coral–are particularly susceptible to sell-off, according to one source familiar with the machinations of the company’s tortured corporate politics.

Moelis, a boutique investment bank based in New York, has been engaged to explore the possible sale of Entain brands.

Amid the Entain corporate meltdown, activist investors, led by Ricky Sandler of Eminence Capital, who owns some five-percent of the company, have been particularly dismissive of the gambling giant’s recent “unfocussed” and “scatter-gun” mergers and acquisitions spree, arguing that the Nygaard-Anderson/Gibson duopoly paid way over the top for Croatia’s SuperSport (£599m/US$760.55m), Holland’s BetCity (£398m/US$505.34m) and Poland’s STS (£750m/US$952.27m).

Most notably, Entain brands that may be sold-off include those that are not integrated into the company’s proprietary technology platforms.

Existential Crisis

These cover a wide geographic base, embracing Australia (Ladbrokes affiliate), Georgia in the Caucasus (Crystalbet) and Sweden (Enlabs).

According to City insiders, money monsters circling Entain include Leon Black’s Apollo Asset Management, who currently control some US$500 billion (£393.89bn) of assets, and Luxembourg-based CVC Capital Partners, who own PG Tips among a string of other international brands worth around €160 billion (£137.01bn).

Few can deny that the roots of Entain’s current existential crisis can be drawn back to the administration of former CEO Kenny Alexander and the scandal of the company’s money-laundering breaches in Turkey when it was operating as GVC.

How can anyone, even a gambling giant like Entain, survive a £615 million hit, as delivered by UK authorities in December?

Keeping calm and having a cup of tea is unlikely to do it.

Watch this space.