Stick or twist? DraftKings weighs Entain bid that could spark battle

FILE PHOTO: General view inside a Ladbrokes shop in Harpenden, Britain, March 18, 2020. REUTERS/Peter Cziborra/File Photo

(Reuters) -U.S. sports betting firm DraftKings must decide on Tuesday whether to make a formal offer for Entain, potentially kicking off a $22-billion-plus bid battle for the British gambling firm.

Shares in Entain, which hit a record high late September after it received a $22.4 billion buyout proposal from DraftKings, have been bolstered by speculation the firm’s U.S. partner MGM could also make an offer.

MGM tried to buy the owner of Ladbrokes and Coral betting shops earlier this year for $11 billion, which Entain rejected as too low.

After DraftKings’ bid, MGM said any deal that would make Entain a competitor in the United States would require its consent.

Dealmaking in the online gaming industry has been picking up as the United States opens up to sports betting and players look to build scale and tap the expertise of foreign companies in more developed markets, such as Britain.

JP Morgan analysts have said DraftKings may have to sell Entain’s 50% stake in the BetMGM joint venture to MGM to get consent from the U.S. casino operator.

Britain’s takeover regulator set Oct. 19 as the deadline for DraftKings to either make a formal offer or walk away from Entain, which owns online brands such as bwin and partypoker as well as traditional betting shops.

Takeover battles for British companies have heated up in recent years as Brexit and the COVID-19 pandemic hammered valuations, and a number of deals have received takeover deadline extensions. A bid battle for supermarket group Morrisons ended up in an auction.

If DraftKings were unable to make a firm offer but is reluctant to give up on its attempt altogether, there could be a situation akin to security firm G4S whose takeover deadline was extended repeatedly before U.S. group Allied Universal beat out rival bidder GardaWorld.

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