Entain Plc saw its share price rise 2.9% to 579.00 pence on Tuesday, after People Inc launched a massive $18B proposal to buy MGM Resorts International, fueling speculation on a buyout of its 50% share in BetMGM.
This development sparked fresh speculation that they could buy out Entain's share in BetMGM, with the joint venture equally owned by the respective entities.
Ladbrokes and Coral owner Entain owns 50% of BetMGM, the US sports betting and online gambling arm it runs in tandem with MGM Resorts, the same company behind iconic Las Vegas venues such as the Bellagio Hotel and Casino.
On Monday, the New York-based digital and publishing giant People Inc - formerly known as IAC - registered a non-binding offer to snap up all the MGM shares it doesn't already own.
The offer was for $48.30 per share, in cash, placing an estimated $18B price tag on the business enterprise.
Share price rises for MGM Resorts and Entain, joint owners of BetMGM
MGM shares shot up 16% to close at $50.59 in New York on Monday June 1, following the offer.
People Inc commenced buying MGM shares in 2020 and now holds 26.1% of the company stock.
"We began investing in MGM nearly six years ago because we believed it represented a rare kind of business: one with real-world assets that AI cannot easily replicate or disintermediate and exceptional digital growth opportunities," said Barry Diller, Chairman and Senior Executive of People Inc.
"That conviction has only strengthened over time. We continue to believe the market materially undervalues the power and durability of MGM's assets", added Diller.
Across the Atlantic in London, Entain shares climbed 2.9% to 579.00 pence on Tuesday on hopes that People Inc could launch a buyout of Entain's 50% stake in BetMGM.
Analysts react to Entain position after People Inc bid
In a research note, Citigroup analyst Monique Pollard noted there are no explicit change of control terms within the BetMGM joint venture that would give Entain any say on a change in the parent, or require any new parent to bid for Entain's existing share.
However, Pollard expects Entain's positive share price reaction to persist, given the potential for People Inc to seek sole control of BetMGM should it successfully acquire MGM Resorts.
It was further underlined that this is not a requirement for any potential acquisition.
The speculation was further amplified after a BNP Paribas analyst told The Times they believe a possible change in ownership at MGM "could lead to an acceleration of management ambitions to fully consolidate BetMGM".
Deutsche Bank reflected this view, stating that the bid provides an element of share price support for Entain given the potential for what could follow.
Further, Deutsche Bank analyst Richard Stuber upheld a buy rating on Entain with a target price of 1028p, showing the scope for significant growth from its current position.
