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Nevada’s MGM Resorts International has agreed to acquire Swedish online casino operator LeoVegas for around $607m in cash, the companies announced early on Monday morning.
In a statement, MGM said its offer of SEK61.00 per share would be funded with existing cash and “provide a unique opportunity for the company to create a scaled global online gaming business.”
“We have achieved remarkable success with BetMGM in the U.S., and with the acquisition of LeoVegas in Europe we will expand our online gaming presence globally,” MGM CEO Bill Hornbuckle said.
“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 realize the potential of our omnichannel strategy.”
The offer has been recommended for approval by LeoVegas’ board of directors, which had been engaged with advisors on a potential sale of the company and held discussions with other interested parties, according to a board statement.
An initial offer was made by MGM in February and then renegotiated “to a price level other interested parties could not match,” LeoVegas’ board said.
The LeoVegas board said the casino-resort giant’s offer of nearly SEK6bn represents a premium of some 44.1 percent on LeoVegas’ share price at closing on Friday in Stockholm and 76.5 percent from the average price over the past six months.
“LeoVegas operates in an industry which is characterized by, inter alia, high innovation pace, new regulation and consolidation. In this context, the Board of Directors believes that the industrial logic and strategic fit between LeoVegas and MGM is attractive and should serve both the company and its employees well in the future,” the board said.
An acceptance period will open on or around June 3 and run until around August 30, with closing expected later in the second half of the fiscal year, pending regulatory and shareholder approvals.
Monday’s announcement came as LeoVegas also brought forward publication of its first quarter results.
The company said revenue for the first quarter was up 2 percent to €98.5m, reflecting its temporary withdrawal from the Netherlands and tough comparisons. First-quarter EBITDA was €14.1m, up 29 percent on last year.
MGM’s presence in the online gambling market is currently limited to its BetMGM joint venture with Entain in various U.S. states and Ontario in Canada, where LeoVegas has also recently launched its eponymous Royal Panda online casino brands.
Hornbuckle said previously he would have preferred for MGM to own all rather than half of its U.S. online operation, which is number one in online casino and is jostling with DraftKings for second place in sports betting, behind Flutter’s FanDuel.
However, an early 2021 offer by MGM to acquire Entain was rejected.
Commenting on the deal, analysts at Regulus Partners said LeoVegas “had a lot more to recommend it to MGM than a similar leonine logo,” including a strong brand, management team and profitable operation, “which should be no small attraction given the potential value-trap of U.S. markets.”
“The obvious elephant in the room is the BetMGM JV with Entain,” Regulus said, noting the failed negotiations by DraftKings last year to acquire Entain and then potentially sell the 50 percent interest in BetMGM to MGM Resorts.
“While from an operational perspective running BetMGM in the U.S. as a JV while the two partners compete elsewhere is valid enough, it is likely to ratchet up strategic tensions, in our view,” Regulus said.
“MGM seems set to own its own digital capability on a global basis one way or another, meaning the LeoVegas bid looks like a much more strategic play than an operational bolt-on. It is therefore unlikely the story will end here.”
