Ladbrokes owner played it cool over £8bn takeover offer – now new suitor is offering double

It takes a brave board of directors to reject a takeover bid at a juicy premium to where the share price was before.

Accordingly, eyebrows were raised when, in January this year, the gaming company Entain – owner of bookmakers Ladbrokes and Corals and the bingo operators Gala and Foxy Bingo – turned down an £8bn approach from the US hotel and casino operator MGM Resorts International.

It was a doubly bold move because, just days after the approach was made, Entain’s former chief executive, Shay Segev, resigned in order to take up a lucrative role with the sports broadcaster DAZN.

Image: In the UK, Entain operates the Ladbrokes chain of betting shops

Companies who lose their chief executive in the middle of a takeover contest tend to be sitting ducks.

The decision was all the more courageous because MGM happens to be Entain’s joint venture partner in BetMGM, an US online sports betting business, so spurning its approach could have jeopardised that operation.


Instead, Wigan-born chairman Barry Gibson – a career retailer who was previously chief executive of Littlewoods and retail director at the airports operator BAA – moved quickly to appoint a new chief executive in Jette Nygaard-Andersen, who had been an existing non-executive director with Entain.

Ms Nygaard-Andersen, who comes from Denmark and educated at Cambridge University, was, despite a 20-year career in media, sport and entertainment, relatively unknown to UK investors.

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Speculation raged around the City that the Entain board had, in gaming parlance, overplayed its hand.

So the board deserves a good deal of credit for resisting the temptation to snatch at MGM’s offer – now that Entain has attracted a further approach, from the US gaming company DraftKings, valuing it at more than twice what MGM were prepared to pay.

Image: DraftKings has proposed a £16.4bn deal Pic: AP

Moreover, Ms Nygaard-Andersen has proved to be a safe pair of hands.

Despite that bold show of independence earlier in the year, though, the odds against Entain remaining so have to be shortening.

For a start, investors are likely to take the approach from DraftKings, which values Entain at £16.4bn, more seriously than they did the approach from MGM earlier this year.

Michael Mitchell and Jack O’Halloran, analysts at the stockbroker Davy, pointed out in a note to clients this morning that the price represents a 46% premium to the company’s share price before its interest became known.

They wrote: “In our view, the bid should be considered by shareholders.”

Secondly, though, the interest from DraftKings may well trigger a counter-bid from MGM.

It has been quick to point out that, as Entain’s exclusive US partner in online sports betting, it will need to give its consent to any takeover.

The company added: “MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”

Image: Coral is also part of the Entain group

But most sector-watchers are assuming MGM will hit back with an improved offer of its own, not least because its biggest shareholder, IAC, was supportive of the previous takeover and made clear that it would have backed MGM in making a higher offer.

IAC’s famously hard-driving chairman, Barry Diller, told the Financial Times in January that, if MGM failed to achieve a leading position in the US gaming market “with all the opportunities that we have, we should be taken out and shot”.

Yet a counter-bid from MGM is not guaranteed.

This possibility was raised by Douglas Jack and Ivor Jones, analysts at investment bank Peel Hunt, in a note to clients this morning.

They wrote: “As MGM said in its statement, in relation to the issues around the BetMGM joint venture, there could simply be a commercial agreement between MGM and DraftKings.”

DraftKings, meanwhile, also has some challenges of its own.

MGM may insist that it sells Entain’s stake in BetMGM to it in order to give the deal its blessing.

A number of Entain shareholders are also likely to be unhappy that there is a small cash element to the DraftKings offer.

Image: MGM owns resorts including the Bellagio in Las Vegas

Most of it is in shares of DraftKings and not all Entain shareholders will be allowed to hold those under their investment mandates.

Alternatively, in order to obtain MGM’s support, DraftKings might offer to merge with BetMGM – effectively making MGM its largest shareholder.

One thing does seem certain.

If Entain is taken over, its new owner is unlikely to have much interest in owning Ladbrokes and Corals betting shops.

It is the US online sports betting business, and the technology underpinning it, that MGM and DraftKings covet.

This proved to be the case when, late last year, the US casino giant agreed to buy William Hill for £2.9bn.

It was only interested in the latter’s US sports betting operations and, earlier this month, sold William Hill’s 1,400-strong chain of UK betting shops to online betting firm 888 Holdings for £2.2bn.

The Ladbrokes and Coral betting shops estates are likely to find themselves being similarly hawked before too long.