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(Reuters) – Ladbrokes (LON:LCL) owner Entain said on Monday that an $11 billion takeover approach from U.S. casino operator MGM Resorts (NYSE:MGM) significantly undervalued its business, as companies move to capitalise on an expected boom in U.S. sports betting.
The United States is widely viewed as the next big growth market following a 2018 Supreme Court ruling that lifted a ban on sports betting. U.S. companies have sought partnerships to tap European expertise, including Caesars (NASDAQ:CZR) Entertainment’s 2.9 billion pound deal for Britain’s William Hill.
MGM and Britain’s Entain, formerly known as GVC, have had a joint venture since 2018, when they set up an online betting platform in the United States after the court ruling.
MGM’s proposed offer of 1,383 pence per Entain share implies a total deal value of 8.09 billion pounds ($11.08 billion), according to a Reuters calculation, representing a premium of 22% to Entain’s last close.
Shares in Entain jumped as much as 28% to an all-time high of 1,455 pence on Monday, leading gainers on the UK blue-chip index in early trade.
Entain said it received multiple proposals from MGM, with the latest one being MGM’s offer of 0.6 of its shares for each Entain share. Under the proposal, Entain shareholders will own about 41.5% of the enlarged MGM.
“Entain has informed MGMRI that it believes that the proposal significantly undervalues the Company and its prospects,” it said on Monday.
Davy Research analysts also said the proposal undervalued the group’s operations, including its prospects in the United States.
“MGM’s flexibility and ability to improve its offer will therefore be key,” they added.
Entain has itself expanded rapidly through a series of acquisitions and owns the bwin, Coral and Eurobet brands. It has asked MGM for more information on the strategic rationale for a combination.
Las Vegas-based MGM has indicated that a limited partial cash alternative would also be made available to Entain shareholders, the company said.
MGM did not immediately respond to a Reuters request for comment.
The proposal had been reported by the Wall Street Journal on Sunday.
($1 = 0.7301 pounds)
