Renewed rumours around the resurgence of the pursuit of Entain by MGM Resorts were understandably met with much scepticism on Friday morning; however, a deal may not be as much of a fantasy as many believe.
The appetite for M&A across the spectrum of the UK market remains strong as a new taxation era enters its infancy and an entirely different landscape begins to emerge.
Speaking to iGaming Expert, Ivor Jones, Equity Analyst at Peel Hunt, emphasised that despite this rumour ebbing and flowing for more than five years, it doesn’t mean that there is no truth behind it this time.
We have seen an influx of rumours around the sector when it comes to M&A, notably Bally’s bid to scale in the market through a reported bid for embattled evoke.
As Bally’s bid for evoke grows increasingly likely, it does so in many ways, defying much rationale, which is perhaps why, in this new era, we should be less than surprised by MGM Resorts battling against the logical playbook and looking to secure a long-rumoured deal for Entain.
Jones said: “While it might make more strategic sense for MGM Resorts to simply acquire Entain’s 50% stake in BetMGM, Entain shareholders would probably prefer not to be left with the ex-US business to deal with.”
However, he implied that opportunity could knock for the operator, as the share price trajectory of the two companies could present an opening too fruitful to miss out on.
He continued: “Since the start of January 2021, MGM Resorts’ share price is up 21% and Entain’s is down more than 50%, which would appear to make a deal easier for MGM to execute.”
As the UK gambling sector adapts to a new regulatory and financial landscape, this type of deal would be consistent with the widely warned-about consequences of the market disruption caused by the tax hikes in the last budget.
Jones continued: “Putting this in a broader UK stock market context, it continues to be open season for UK-listed companies with over 60 companies receiving bids in 2025 and multiple live deals currently.”
Prediction markets are squeezing the US opportunity
In its latest financial update, MGM Resorts appeared to be fully focused on US market growth. However, margins are also being squeezed as a result of a new market dynamic fuelled by the emergence of prediction markets.
Whilst revenue continued to grow in the US for the operator, BetMGM CEO Adam Greenblatt warned that the brand has seen marketing and acquisition costs grow as a result.
“They call themselves prediction markets, and they are buying sports betting keywords as well as throwing money at any sports media property that will take it,” Greenblatt told investors and analysts.
“They are targeting sports bettors directly in their marketing, thereby bidding up the cost of acquiring new players. Some of these companies even have ‘sportsbook mode’ in their product in an attempt to offer as close an experience as possible to sports betting.”
Although the UK is far from a picture of stability amid tax hikes and the continued battle against the black market, its maturity is perhaps enticing to a tier one operator like MGM Resorts as it looks to diversify its portfolio against a backdrop of US volatility.
