Dodge & Cox, Today What’s In Entain?

As we celebrate the 400th anniversary of Shakespeare’s “First Folio”–the very first assemblage of the Bard’s collected plays–, it seems strangely apposite, certainly not unreasonable, to paraphrase his greatest existential question, “What’s In A Name?” and ask “What’s In Entain?”.

Of late the FTSE-100 British-based gambling giant has been beset by controversial, historic difficulties, involving corruption, duplicity and money laundering, challenges that have not been jettisoned by changing its name from GVC to Entain in December 2020 to symbolise: “A new era of sustainability and conduct.”

Despite a recent, much-heralded pivot to now “operate in only regulated markets”; it’s been heavy weather for the Omnichannel, with the share value of the company plummeting by nearly 29 percent over the last 12-months.

And this June Entain CEO Jette Nygaard-Andersen–who joined the board as a non-executive director in 2019 and was appointed to the top job in January 2021, becoming the first woman to lead a UK-listed betting company–came in for some sharp criticism from important shareholders Eminence Capital of New York for diluting stock in order to raise funds to buy Poland’s dominant STS gambling firm.

International Rescue

The US$750 million (£612.16m) acquisition of STS was “illogical” and a vainglorious attempt at “Empire building”, charged Eminence Capital’s Founder and CEO Ricky Sandler, and was “destroying [Entain] shareholder value by such a strategy”.

Sandler went on to posit that the Poland purchase could even have the unwelcome effect of reviving MGM Resorts’ long-standing ambition to buy Entain outright.

Readers need little reminding that Entain and MGM Resorts run an increasingly successful US sportsbook, BetMGM, that’s challenging Flutter’s FanDuel and Massachusetts-based DraftKings for leadership of the booming American market.

And they may further recall that MGM Resorts made a failed US$10 billion (£8.16bn) bid to buy the owners of storied UK brands Ladbrokes Coral, PartyPoker and bwin only in January 2021.

Entain and MGM remain the best of frenemies, and it was interesting to note that when MGM launched BetMGM in the UK market earlier this year they chose LeoVegas and not Entain as their partner.

But several factors have now coalesced to rescue Entain and Nygaard-Andersen (pictured left) from further churn.

First and foremost, Entain is still facing massive financial sanction from the British Crown Prosecution Service (CPS) under Section 7 of the UK Bribery Act.

It’s alleged that between 2011 and 2017, Entain–then operating as GVC–was involved in widespread bribery, money laundering and corruption dealings through the Turkish arm of its Sportingbet vertical, the Superbahis brand.

Superbahis was sold to a company called Ropso Malta for €150 million–the equivalent of £132 million at the time–but the stain remains.

The claimed Sportingbet/Superbahis malfeasance by its former avatar GVC has hung over Entain as the proverbial Sword of Damocles. And in August this year the company announced that it had set aside a massive £585 million (US$716.71m) to pay a potential fine as it negotiates a Corporate Plea Deal for criminal conduct with the CPS.

Any change in Entain corporate leadership at this most delicate juncture, before legal resolution of its historic Turkish malpractice, is in nobody’s interest.

Good news in business runs like London buses: You can wait for ages, and then along comes two.

Such this past week has been the fortune of Entain.

Shotgun Wedding

First came the boost of an unanticipated “goodish” Q3–which reported a seven percent rise in Group Net Gaming Revenue, year-on-year–and then the news on Monday that US San Francisco-based mutual fund Dodge & Cox had doubled its shares in Entain to 10 percent, worth some £600 million (US$735m), making it the second biggest investor after LA’s Capital Group Companies, who own near 15 percent of the UK gaming giant.

Entain stock rose by as much as five percent following the Dodge & Cox purchase, closing at 941.80 GBX on Tuesday.

It’s all enough, for the moment, to keep Nygaard-Andersen in her current position.

Although it appears–like some under-performing Premiership manager who’s been shotgun-wedded to an overarching player transfer committee–that her acquisitive ambitions have been suborned to a newly-formed Capital Allocation Committee, which one assumes will nix any future buys of the Polish STS ilk.

From focusing on regulated markets, Entain will now pivot to “high-growth markets, an exit of non-core markets and a new approach to capital allocation”, a highly-placed source told iGamingFuture.

Clouds on the horizon?

There remain a number, among them upcoming organisational restructuring – another word for job cuts among its 20,000-plus staff, designed to save an estimated £100 million (US$122.5m) by 2025.

And another bid by its US BetMGM sportsbook joint-venture partner MGM Resorts International to buy Entain outright-first thwarted in January 2021–cannot be ruled out.

For the moment, to paraphrase Shakespeare yet again, at Britain’s premier betting brand: “All’s Well That Runs Well”.

So good in fact that a cluster of board members, among them Jette Nygaard-Andersen herself, have made big purchases of company stock.

A vote of confidence? Or a bargain price too good to miss?

Watch this space!

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