MGM Resorts International recently admitted that it was interested in buying its BetMGM sports gambling partner Entain, but reaching an agreement on the price is going to be a difficult task. Initially, MGM was willing to cough up $10 billion to assume total control over its U.S. sports gambling operations; however, Entain believes it deserves more. According to a new press release from last Friday, the casino operator may have found some additional money, with InterActiveCorp (IAC), an MGM investor, agreeing to throw money into the pot if it will help push the deal along.
IAC is MGM’s largest shareholder and is apparently excited about the idea of seeing MGM control all of its U.S.-based gambling activity. The firm believes the purchase of Entain would make MGM a “pure play omni-channel” leader in keeping with the transformation being witnessed in the global gaming market. It adds that a “strong balance sheet and robust annual free cash flow generation would allow the combined business to aggressively pursue its growth objectives such as U.S. online market penetration, new development in key international gaming markets, future M&A [mergers & acquisitions] and returning capital to shareholders.”
IAC has already put $1 billion into MGM over the years, but is ready to double that amount, if necessary, if it means the company would be able to appease Entain brass and shareholders. MGM and IAC have only begun to scratch the surface about a potential deal, with no concrete details yet being approved. As it stands now, and with the additional backing of IAC, MGM will need to determine by February 1 if it will seriously move forward with an attempt to make a purchase, or if Entain’s asking price is so far out of reach that it needs to decline.
After the news broke that MGM wanted to purchase Entain, industry analysts begin deciphering the move and some viewed it as a sign that the company was considering reducing its Asian footprint. Snow Lake Capital, which has a stake in MGM’s MGM China arm, penned an open letter in which it suggested the company would be wise to bring in a partner out of China, seemingly opposing that possible outcome. For now, it doesn’t appear that MGM, or its Asian channel, are exploring changes of any kind, with MGM China saying in a statement last week, “The Board confirms that, as at the date of this announcement, the Company has no plans of restructuring. The Board will continue to communicate with the Company’s shareholders and operate the Company in the best interests of its shareholders and stakeholders, enhancing shareholder value and performance of the Company.”