.svg)
Body
UPDATED: This article has been updated to include additional comments from the East Coast Gaming Congress in Atlantic City.
DraftKings has said it will not be making a new offer for Entain, ending for now the billion-dollar battle with MGM to acquire the Isle of Man-headquartered gambling giant.
In an announcement to the markets earlier today, DraftKings said that following discussions with the Entain board it had decided not to submit a new offer, after its initial $22.4bn offer was rejected.
Entain announced last week it had secured an extension from the London Stock Exchange to the deadline by which DraftKings was supposed to “put up or shut up” following its first bid.
However, the US fantasy and sports-betting firm confirmed that it was withdrawing from the race, for now.
Jason Robins, DraftKings CEO, said: “After several discussions with Entain leadership, DraftKings has decided that it will not make a firm offer for Entain at this time. Based on our vertically-integrated technology stack, best-in-class product and technology capabilities and leading brand, we are highly confident in our ability to maintain a leadership position and achieve our long-term growth plans in the rapidly growing North America market.”
DraftKings initial offer followed Entain’s rejection of a $11bn bid in January by MGM, with which Entain has a partnership to run the BetMGM brand in the US.
Responding to the DraftKings announcement, Entain issued a statement indicating its board “strongly believes in the future prospects of Entain, underpinned by its leading market positions, world class management team and industry-leading proprietary technology.”
“Entain's management remains focused on executing its growth and sustainability strategy ... to treble its total addressable market to c.$160bn,” it said.
The move by DraftKings to abandon its bid to take over Entain left analysts and investors to speculate on why the deal never moved from the starting line.
One school of thought was that DraftKings’ interest in Entain was more defensive in nature, said noted venture capitalist Lloyd Danzig of Sharp Alpha Advisors.
“Did DraftKings intend to deprive one of its potential competitors from having access to tech stack that they would need?” Danzig asked on Tuesday during a panel discussion at East Coast Gaming Congress in Atlantic City.
“Is it an attempt to purchase international EBITDA and recognised brands? Or is it just an effort to get MGM to bid [more] or whatever it would be for Entain?”
Danzig admitted he was speculating, but suggested that Entain shareholders may have also indicated that DraftKings shares traded at too much of a premium and they would not want to receive them instead of cash as part of an acquisition.
“Maybe DraftKings was stepping back because they thought the deal wouldn’t be accepted because [Entain] shareholders didn’t value their shares enough,” Danzig added.
Chad Beynon, managing director with Macquarie Partners, said from a financial side the Nasdaq- and London-listed companies are valued differently based on what stock market they trade on and what their growth profile is.
“DraftKings obviously achieved an extremely high valuation that most people didn’t expect at this point in the sports betting and iGaming wave,” Beynon said, with the company also able to use its stock as currency to pursue acquisitions.
The prospect of any successful DraftKings takeover was always significantly complicated by the Entain-MGM joint venture, with MGM suggesting it would have the right to veto any purchase unless an agreement on the future of BetMGM could be agreed.
MGM boss Bill Hornbuckle indicated as recently as this month that his company still has eyes for some sort of deal to take full ownership of BetMGM.
“We’re entrenched in [Entain’s] technology and so we would love to own more of BetMGM,” he told an audience at the recent Global Gaming Expo (G2E) conference in Las Vegas.
Additional reporting by Chris Sieroty in Atlantic City.
