Sports gaming company DraftKings (DKNG) has made a $22.4 billion bid for the U.K. gambling company Entain PLC.
DraftKings’ £16.4 billion offer of mostly stock and some cash would value the company at about £28 per share, which is higher than its original bid of £25 per share. Entain rejected the first bid for being too low, according to The Wall Street Journal.
Under the United Kingdom's takeover code, DraftKings has until Oct. 19 to make Entain a formal offer or walk away from the deal.
Entain officials say that they will “carefully consider the proposal,” reports Reuters.
Entain is the largest international sports betting and gaming provider.
Entain is one of the world’s largest sports betting and gaming groups with licenses to operate in 27 countries. The company owns Coral and Ladbrokes, which are traditional betting shops. It also owns bwin and partypoker, which are online sports betting brands. Last year, over 2 million sports bets per day were placed on Entain platforms.
The company reported £2.7 billion ($3.69 billion) in net online gaming revenue for 2020, which was about a 28 percent increase over 2019.
DraftKings competitor, MGM, needs to approve the deal.
DraftKings’ main competitor, MGM also gets a say in whether the deal goes through or not. MGM is Entain's exclusive partner in the U.S. online sports betting and iGaming market through a joint venture for BetMGM. So, any transaction that would compete with MGM will require its consent.
“MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties' objectives,” the company said in a statement about the DraftKings bid. “MGM's priority is to ensure that BetMGM continues to capture the growing U.S. online opportunity and realizing MGM's vision of becoming a premier global gaming entertainment company. MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.”
DraftKings’ bid is about twice that of an $11 billion MGM bid Entain rejected in January. Some analysts say that DraftKings might have to sell Entain’s stake in BetMGM to MGM to get MGM’s blessing on the deal.
For 2020, Entain garnered $178 million in net gaming revenue from the BetMGM joint venture.
DraftKings bid caused a jump in Entain's share price.
Reports of the DraftKings offer sent Entain shares soaring to a record high on Sept. 22. Entain shares reportedly jumped as much as 18 percent on London’s benchmark index, the Financial Times Stock Exchange (FTSE).
DraftKings moves to expand its customer base.
Many see DraftKings’ bid for Entain as a move to expand in the international market. The Boston-based digital sports entertainment and gaming company has made several recent moves to broaden its customer base. In August, DraftKings paid $1.56 billion in an all-stock deal for Golden Nugget Online Gaming.
Analysts expect that the market for sports betting could generate $4 billion in revenue this year, Reuters reports. Sports wagering in the U.S. is legal in 32 states and the District of Columbia.