MGM Resorts makes $607m play to acquire LeoVegas

MGM Resorts has tabled a public tender offer for all of LeoVegas’ shares at a price of SEK61per share (£4.94).

The bid, which is 44% above Stockholm-listed LeoVegas’ closing price of SEK42.32 on Friday and would be financed with existing cash, equates to a total value of around $607m (£483m).

LeoVegas’ board of directors has unanimously recommended that shareholders accept the offer.

The acceptance period for the offer is expected to begin on or around 3 June 2022 and expire on or around 30 August 2022.

News of the Las Vegas-based casino group’s swoop for the gaming-led online operator sent shares in LeoVegas surging 45% to almost SEK60.

MGM Resorts said the deal would provide “a unique opportunity to create a scaled global online gaming business”.

The casino operator also pointed to LeoVegas’ “strong customer base outside of the US”, its experienced team and scalable tech platform, as well as its “commitment to profitable growth”.

From 2017 to 2021, the annual compounded growth rate of LeoVegas revenue was 16%.

For the past 12 months to the 31 March 2022 the company generated revenue of €393m (£330m) and adjusted EBITDA of €48m.

Bill Hornbuckle, MGM Resorts CEO and president, said: “Our vision is to be the world’s premier gaming entertainment company, and this strategic opportunity with LeoVegas will allow us to continue to grow our reach throughout the world.”

“We have achieved remarkable success with BetMGM in the US, and with the acquisition of LeoVegas in Europe we will expand our online gaming presence globally.”

He added: “We believe that this offer creates a compelling opportunity that allows the combined teams of MGM Resorts and LeoVegas to accelerate our global digital gaming growth and fully realise the potential of our omnichannel strategy.”

The online casino-led operator was due to release its Q1 results on Thursday but was forced to bring the announcement forward due to the MGM Resorts offer.

Revenue was up 2% to €98.5m, while EBITDA came in at €14.1m, representing an EBITDA margin of 14.4%.

Since the summer of 2018, MGM Resorts has held a 50-50 JV with Entain (then GVC) in leading online casino and sports betting brand BetMGM.

MGM made a $11bn takeover offer for Entain in January 2021, yet the deal was rejected as Entain said at the time that it “significantly undervalues the company and its prospects”.

Acquiring LeoVegas would diversify MGM Resorts’ online footprint, particularly outside the US. Around half of LeoVegas’ revenue is derived from the Nordics, while the LeoVegas and Royal Panda brands are live in Ontario’s recently regulated market (the province accounted for 13% of group revenue in January).

The Stockholm-headquartered company also boasts its own casino platform, dubbed Rhino, as well as a complementary sportsbook (12% of Q1 2022 revenue compared with 72% for ‘classic casino’ and 16% for live casino) powered by Kambi.

Founded in 2011 by Gustaf Hagman and Robin Ramm-Ericson, LeoVegas recently marked its 10-year anniversary of going live, initially in its home market of Sweden, in January 2012.

The firm went public in March 2016 on the Nasdaq First North Premier and today consists of almost a dozen brands including GoGoGoCasino, BetUK.com, Pink Casino and 21.co.uk and Expekt.

In a note, Regulus Partners said LeoVegas “has a lot to recommend it to MGM Resorts than a similar lionine logo”.

“In an online gaming environment too often driven by bonuses, VIPs, and churn, LeoVegas has built a strong brand and effective growth business (+9% Q1 year-on-year against tough comps, ex Netherlands) by focusing on product and customer service,” the analyst firm wrote.

“While having no omnichannel exposure, this ethos fits well with MGM’s culture. Further, by owning LeoVegas outright, MGM gains access to a proven operations management team and platform which can be considered best-in-class for casino gaming.

“MGM also gets access to instant online gaming profitability, which should be no small attraction given the potential value-trap of US markets.”