Entain, the UK gambling group behind Ladbrokes Coral, has rejected a takeover proposal from the US casino group MGM Resorts that values the company at about £8bn.
In a statement on Monday, the FTSE 100 company said that the bid from MGM “significantly undervalues [Entain] and its prospects”.
The UK company, which also owns sports betting site Bwin and online gaming group Partypoker, added that it had requested more information from MGM “in respect of the strategic rationale for a combination of the two companies”.
The move by MGM, owner of the Las Vegas Bellagio casino, comes as US operators battle for a share of the fast-growing online gambling and sports betting market, which has taken off across US states after a Supreme Court decision in 2018 eased regulations.
Under the takeover proposal, investors in the UK group would receive 0.6 MGM shares, valuing their Entain shares at 1,383p. Shares in MGM surged more than 25 per cent in early trading on Monday.
MGM has indicated that a “limited partial cash alternative” would also be made available to Entain shareholders, the UK group said in a statement.
The proposal from MGM is backed by the billionaire mogul Barry Diller’s IAC group, according to people briefed about the matter. It follows an earlier all-cash proposal worth about $10bn that was also rejected, the people said.
Speculation that MGM might move to take over Entain increased following rival casino operator Caesar’s £2.9bn acquisition of the UK bookmaker William Hill, which is expected to complete in the first half of this year.
MGM and Entain have been partners in a $200m joint venture to pursue sports betting opportunities in the US since 2018, which they increased their investment in to $450m in July last year.
Diller’s IAC, which invested $1bn in MGM earlier this year to boost the casino operator’s online business, is supportive of the bid for Entain and is willing to inject an extra $1bn to finance the takeover of the London-listed group, said those briefed about the matter.
David Satz, a former executive at US casino operator Caesars Entertainment with extensive expertise in the US gaming regulatory environment, was recently added to the board of directors of Entain to help the UK group assess its future prospects in the American market.
Mr Diller, who launched the Fox television network for Rupert Murdoch before building his own broadcasting and digital media empire, said in August that IAC’s experience could contribute to the growth of MGM’s online gaming business.
IAC currently owns scores of online and digital media brands, including news site The Daily Beast, video streaming website Vimeo and home improvement site Angie’s List.
Entain, which recently rebranded following the appointment of a new chief executive, has said it believes it can take a lead position in the US sports betting market, which it estimates could reach $20bn in revenues by 2025 — up from about $1.4bn this year.
MGM declined to comment on the bid speculation on Sunday, while IAC said in an email that “we don’t comment on rumours or speculation”. Neither could be immediately reached for comment on Monday.
Under UK takeover rules, MGM has until February 1 to make a firm offer for the company.