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MGM Resorts International has moved on from acquiring the 50 percent share in BetMGM owned by Entain after an $11bn bid was rebuffed as significantly undervaluing the company, according to CFO Jonathan Halkyard.
“It was … known that we were interested in acquiring that business,” Halkyard said, referencing an early 2021 offer for BetMGM co-owner Entain. “It didn’t work out. So we just moved on. And by moving on, we’re just focusing on the continued development of BetMGM as a business.”
Halkyard told Jefferies gaming, lodging and leisure analyst David Katz on Monday (June 20) during a global consumer conference call that MGM's focus continues to be on enabling BetMGM to grow its business as new markets open up and maintain or grow its market share.
“And then continue on a road to eventual profitability of that enterprise, which we think is in 2023,” he said.
Currently, BetMGM is operating in 23 U.S. states with market access deals secured for another 29 states. The company also launched its app in Ontario in early April.
At the end of the first quarter, BetMGM reported a 24 percent market share in U.S. active markets in both sports betting and internet gaming. MGM reported that its 50 percent BetMGM losses in the quarter were $92m, which the company attributed largely to its initial investment in mobile sports betting in New York.
Halkyard said MGM continues to integrate BetMGM into its core casino business, as well as MGM Rewards, with the ultimate vision of BetMGM becoming a “big digital business of MGM Resorts.”
“It becomes almost a synthetic regional network … that’s how we’re meeting new customers in states where we don’t operate [and] those customers then become entangled in our loyalty program and visit our properties in Las Vegas and so on,” he said. “The typical things that we do with our customers.”
Katz asked Halkyard if there is a point where BetMGM can be integrated onto a single digital wallet that could be used whether online or at a land-based casino.
“The technology is not terribly difficult, but the payments mechanisms and the regulatory [obstacles], and there’s some responsible gaming issues that we need to be aware of and deal with, but the idea of a BetMGM customer coming to an MGM Resorts property with a single wallet shared between the two is certainly something that we’re going to be able to do.”
During Monday’s conference call, Halkyard also discussed the company’s plans for New York and updated investors on MGM’s opportunity in Japan.
“New York is a very attractive opportunity,” he said. “MGM required Empire City in Yonkers several years ago, and it was really done with the idea that eventually we could have full-scale table games and casino in that area.”
MGM acquired Empire City’s racetrack and its video lottery casino in 2018 for $850m, before selling the real estate associated with the property to MGM Growth Properties for $650m.
New York lawmakers agreed as part of the state budget this year to award up to three additional casino-resort licenses in the downstate region that includes the New York City metro market.
“That’s taken a bit longer than we expected, but it now appears to be ... well underway and so we’re going to be an aggressive bidder for that opportunity,” Halkyard said.
He added that MGM has begun preparing its request for proposal (RFP), which will be submitted to the five-member Gaming Facility Location Board appointed by the New York State Gaming Commission in accordance with the budget law. The board will assess the responses on their respective merits using a designated scoring system.
The upfront casino license fee of at least $500m and an annual license fee of $750 per gaming position, compared with the $500 per position paid by the four existing casino-resorts, makes New York the most expensive new market in the U.S.
“It’s a big opportunity for us because certainly it’s a huge market,” Halkyard said. “We’ll be disciplined in the capital we invest … but we’ll be able to be in business if we get the license with table games very quickly. It’s an important opportunity and one that we’ve been working on for probably five years.”
In March, MGM, through its MGM Japan subsidiary, was cleared to move forward with presenting its reported $8.8bn integrated report concept for Osaka to Japan’s central government.
MGM is leading a consortium with Japanese financial services group Orix Corporation, which is proposing constructing a casino complex on Osaka’s Yumeshima Island.
“We’ve been working on Japan for many years,” Halkyard said. “We submitted what’s called an area development plan, and we would expect in the September timeframe to be among the licenses awarded … and that we would then be underway as we get into 2023.”
Halkyard reminded analysts on Monday that MGM's Osaka integrated resort is a large project that is going to take several years to complete. He added that MGM would wait until the process is more advanced before offering specific details about costs and a project plan.
