Bill Hornbuckle Voices View on DraftKings/Entain Situation, Open to BetMGM Majority Stake
Posted on: October 6, 2021, 12:49h.
Last updated on: October 7, 2021, 10:51h.
MGM Resorts International (NYSE:MGM) Bill Hornbuckle is making clear his company’s outlook on DraftKings’ (NASDAQ:DKNG) attempt to acquire Entain Plc (OTC:GMVHY) — MGM’s partner in the BetMGM venture.
While noting MGM has “a great relationship” with BetMGM, and that the casino operator is enthusiastic about the prospects for the thriving iGaming and online sportsbook enterprise, Hornbuckle went further. He overtly states that should DraftKings successfully acquire Entain, it will need approval from MGM if it wants to continue operating the BetMGM unit in the US.
They’ll need to come to us if they want to continue to operate in the US. They can’t do both,” said Hornbuckle in an interview with CNBC’s Contessa Brewer.
That’s a reiteration of the casino giant’s stance on the matter. When DraftKings’ initial bid of $20.5 billion for Entain was revealed last month, MGM issued a statement saying it’s staying abreast of the situation. It also noted that under the terms of its agreement with Entain, the Mandalay Bay operator must approve any combination that could lead to Entain becoming part of a competing business.
DraftKings since floated a $22.4 billion cash and stock bid for the Ladbrokes owner and has until Oct. 19 to formalize an offer.
‘Casual Conversations’, Hornbuckle Open to Larger BetMGM Position
The MGM chief executive says in the interview that, to date, there have been “casual conversations” with DraftKings. He said the casino operator will be enthusiastic about garnering a large percentage of BetMGM.
“If we’re able to acquire and get a piece, a larger piece, and take over BetMGM, it’s something we’d also be excited to do. It’s up to them,” said Hornbuckle.
In the wake of DraftKings’ move on Entain, rumors are swirling regarding what cards MGM could play in this scenario. The operator has options to gain majority or full control of BetMGM, including possibly bringing a BetMGM initial public offering (IPO) to market. MGM attempted to acquire Entain in January for $11.06 billion, but that offer was spurned.
Industry insiders are speculating cash-rich MGM could simply buy Entain out of BetMGM, or approach DraftKings with an offer should it land the Coral owner. That could be a cost-effective move for MGM because BetMGM is forecast to generate about $1 billion in revenue this year. That means it’s unlikely MGM needs to pony up a rich multiple to acquire the business.
DraftKings’ Intent Still Murky
While it’s clear DraftKings wants to acquire Entain, the suitor hasn’t commented publicly on whether or not it’s angling to gain control of BetMGM. If it did so, it would likely be with the hopes of folding it into its existing iGaming and online sportsbook business.
There’s talk in the investment community that DraftKings is pursuing Entain for the target’s technology assets and capabilities and as an avenue for international expansion. That implies the suitor may be open to an amicable resolution regarding BetMGM.
Other rumors suggest DraftKings is merely floating lofty bids for Entain in an effort to compel a rival to enter the fray and potentially overpay for the target. For now, conventional wisdom indicates MGM won’t be coming over the top of DraftKings and making another offer for Entain. But one analyst recently said that the floor for topping DraftKings’ proposal is likely $25 billion — a price point that significantly limits the pool of credible buyers.
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