Jason Ader: MGM’s Entain takeover is far from finished

MGM Resorts cannot afford to walk away from a fresh bid for US joint venture partner Entain, according to SpringOwl Asset Management CEO Jason Ader.

MGM this week decided against making an increased bid for the FTSE-100 firm, but reiterated its commitment to the pair’s BetMGM JV partnership while opting to look for “compelling strategic opportunities” elsewhere.

Following MGM’s announcement, Entain saw more than £1bn wiped off its market cap, although the share price has since rebounded.

For Wall Street veteran Ader, those “compelling strategic opportunities” could, and should, encompass a fresh bid for Entain. “In my opinion, it’s not over,” Ader told EGR. “There’s very few reasons why these businesses shouldn’t come together and there’s way more reasons why they should.

“Unfortunately, Entain lost Shay Segev who was amazing, I mean, spectacular, and that was a big loss, so we’ll have to see how the leadership evolves in the company,” he added.

Segev will be replaced by non-executive director Jette Nygaard-Andersen, who was confirmed as Entain CEO as the firm announced its Q4 results. The final three months of 2020 proved to be a successful period for Entain, with online net gaming revenue up 41%.

In contrast, land-based giant MGM has been severely impacted by Covid-19-related closures to its casino portfolio, with Q3 net revenue dropping by 66% amid an operating loss of $495m.

These losses are expected to narrow once business returns to normal but, for Ader, it might get worse before it begins to get better.

“For me, the expectation that MGM will see a recovery in its core market, based on the comments management has made, I think is just too optimistic,” he explained.

“Bill Hornbuckle [MGM Resorts CEO], he’s a very smart guy, he’s a great negotiator, and one of the toughest, so I would bet he’s going to figure something out, but he’s also got to be smart about it. I still think these top companies can come together,” he added.

Ader, who recently launched a SPAC called 26 Capital to help gambling firms go public, suggested land-based operators must look to improve online operations in a post-Covid world.

The 26 Capital SPAC, which initially was expected to raise $240m, managed to generated a further $35m in funds following increased demand from investors. It is understood the investment vehicle will target undervalued gaming companies and firms in the ecommerce sector.

“I am a huge believer that the land-based gaming companies like MGM haven’t come to the realisation that their core businesses in Las Vegas and around the US are impaired and will continue to be so in the future,” Ader told EGR.

“Against that backdrop, the online gaming business is just getting bigger, better and rolling out quicker.

“It’s hard to imagine anybody leading a land-based company not looking at the economics of online gaming and working towards a conversion process towards digital.

“I’ve talked previously about the example of Walmart and land-based firms are at a similar crossroads. They can either embrace it or become like the 100 or so retailers to have gone bankrupt,” Ader concluded.