Entain shares plunge 13 percent as MGM backs out of second bid

Shares of UK-based gambling company Entain experienced a significant drop of up to 13 percent on Thursday following the announcement by MGM Resorts that they will not be pursuing a second takeover bid for the Ladbrokes owner. This news crushed the expectations of investors who were hoping for a substantial payout.

In January 2021, MGM, the operator of the Bellagio casino in Las Vegas, initially made a bid for Entain, offering shareholders equity in MGM that valued Entain at £8 billion (roughly US$9.6 billion) — or £13.83 ($16.68) a share — which represented a 20 percent premium on its current trading price.

However, the offer was rejected by the majority of shareholders, including institutional investors such as money managers Capital Group, Janus Henderson and Abrdn.

Industry insiders and some Entain shareholders had anticipated MGM to renew its bid once the UK government released its long-awaited gambling review. This review — the first industry overhaul in nearly two decades — is expected to be published in the coming months.

MGM’s explanation

During an earnings call on Wednesday, MGM chief executive Bill Hornbuckle was asked about a potential second bid for Entain.

“The simple answer is ‘no’, we’ve moved on,” Hornbuckle said.

He added that he “highly focused” on the growth of BetMGM, a betting and gaming joint venture between MGM and Entain operating in 25 U.S. states, and the expansion of LeoVegas, a mobile betting operator that MGM acquired for $604 million in the previous year.

Hornbuckle also said the company will go in its own direction as it begins to allocate capital.

The announcement that MGM wasn’t going to make a second bid caused Entain’s stock price to go down by 13 percent below £14 ($16.89) in morning trading. It then improved slightly to $17,41 — a drop of around 8 percent compared to the previous day. Entain refused to make any comments about it.