No justification for Entain to rush into accepting MGM Resorts’ bid


It seems surprising that Las Vegas casino firms, the big beasts of the U.S. gaming scene, are such digital idiots that they let U.K.-listed businesses tell them how to operate an online betting company.

But a trend has been established.

Sophisticated back-office technology, proven in Europe over the years, is seen as key to breaking the deregulating U.S. betting market. Caesars Entertainment agreed last year to acquire William Hill for £ 2.9 billion. U.S. money flows into PaddyPower and Betfair’s director, Flutter Entertainment. “significantly undervalues the company and its prospects.”significantly undervalues the company and its prospects.

After all, it wasn’t that long ago that GVC was a washed-up Aim-listed operator that made a lot of its money in high-risk, unregulated markets (and HM Revenue & Customs is still investigating payment processing in a former Turkey division). Ladbrokes owner shares leap after rejection of £ 8.1 billion MGM bidContinue readingBut really, it seems the right reaction to reject MGM’s initial approach. By the end of 2020, Entain’s stock have risen to £ 11.33, and a 22 percent takeover premium is miserable considering the hype surrounding the coming betting boom in the U.S. as regulations loosen there. Entain and MGM run a joint venture called BetMGM in North America 50/50, and although it is currently small (annual sales of around $150 million), the potential for growth is what matters from a persp valuation. Last November, Entain estimated the joint venture’s market share in related U.S. states at 18 percent.

If that share can be defended, and if, as analysts say, the U.S. betting market is ultimately worth $20 billion to $30 billion, don’t give up cheaply before the game has really started. Jefferies analysts had set a £ 14.50 price target for Entain’s shares based on a 15 percent U.S. market share.

But, they added, you might also look at the high valuation of DraftKings, a listed US competitor, and come up with £19.75. £ 13.83 is far from a convincing bid, either way. In addition, because MGM provides shares and only a cash alternative ‘limited portion,’ the bidder is obliged to say something about its future plan for a merged company. Otherwise, how are investors in Entain who, even under these insufficient conditions, will retain 41.5 percent of an expanded MGM to judge what they are offered? For instance, the U.K. will Are betting shops that don’t fit in with the glossy casinos in Vegas preserved or sold? When it comes to a formal bid, MGM, one presumes, can explain those points.

Meanwhile, a relaxed approach should continue to be taken by Entain’s board.

If today’s Americans want to overpay, great.

If not, letting MGM wait to see how the U.S. betting market progresses is not negative.

The selling of Wolseley UK to Ferguson is definitely good newsWolseley used to be a major name in the FTSE 100 until 2017, when, in celebration of its big U.S. building materials market, the company decided it preferred to be named Ferguson. Wolseley UK, the household distributor of heating and plumbing goods, is now exiting the company, and the selling price is not anything to smile about – £ 308 million for a £ 1.4 billion revenue business. The small trading profit of £ 6 million from the UK unit last year partially explains the low price. A poor price signal was also the abandonment of the initial attempt to take the company public.

Clayton Dubilier & Rice, the U.S. private equity company, seems to have had a simple time with the deal; it also managed to compel Ferguson to retain the related pension commitments. The advent of opportunistic private equity capital may be regretted, but it’s actually a positive thing that anyone is willing to make a gamble that a cyclical British company is still worth investing in. The Ferguson board would never have been up to the task, with activist U.S. investors hot on their heels seeking an all-North American company and a U.S. listing.


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