MGM’s biggest shareholder pledges up to $1bn for new partial cash offer for Entain
IAC sends non-binding letter of intent to MGM pledging huge investment with new bid imminent
InterActiveCorp (IAC), the largest shareholder in MGM Resorts International, has pledged to invest up to $1bn (£736m) to help fund a new partial cash offer for Entain after previous bids were unsuccessful.
Details of the investment pledge were revealed late on Friday, with MGM confirming a non-binding letter of intent from IAC indicating its support for the “compelling” £8.09bn ($11.06bn) takeover of Entain – the FTSE 100 gambling operator formerly known as GVC.
The initial all-share bid confirmed a limited cash alternative could be made available to Entain shareholders as an additional incentive.
IAC has indicated that it would be willing to consider funding a portion of this partial cash alternative – up the value of $1bn – through a further investment in MGM “due to IAC’s confidence in MGM and its prospects”.
IAC owns 59,033,902 shares in the US casino heavyweight.
No timescales have been confirmed for the payment of this additional investment amount if accepted by MGM.
“IAC has to date invested approximately $1bn in MGM with an initial investment thesis of accelerating MGM’s penetration of the $450bn global gaming market,” MGM said.
“IAC notes in its letter of intent that IAC continues to strongly support this objective for MGM whether or not a transaction with Entain is consummated,” the firm added.
Detailing the strategic rationale behind the acquisition, IAC said an “alignment of incentives and goals” created by combining the two businesses would accelerate the growth of the BetMGM brand, which is currently operated on a joint venture basis between the two companies.
MGM highlighted the potential mix of its US operations and its M life Rewards programme with Entain’s European and Latam footprint, as well as the opportunities from leveraging each company’s geographic and operational expertise in new markets.
IAC said this would lead to the combined group becoming a global leader in omni-channel gambling.
“A strong balance sheet and robust annual free cash flow generation would allow the combined business to aggressively pursue its growth objectives such as US online market penetration, new development in key international gaming markets, future M&A and returning capital to shareholders,” IAC concluded.
Earlier this week, MGM China shareholder Snow Lake Capital called on MGM Resorts to sell a 20% stake in its China-facing business to provide additional financing to launch a fresh bid for Entain.
The asset management firm suggested the share sale would aid MGM China’s bid to obtain a new licence in Macau, where it is set to retender in 2022.
However, Aberdeen Standard – the third biggest shareholder in Entain – told The Sunday Telegraph that MGM’s initial bid was “not in the right postcode” and undervalued the operator by “billions of pounds”.
Another shareholder told the broadsheet newspaper: “Blockbuster said that Netflix was no good. That’s the closest analogy in my mind. This is Blockbuster putting in a bid for Netflix before it hits scale.”