Ladbrokes owner Entain (ENT.L) has turned down an $11bn (£8.1bn) takeover offer from US casino giant MGM Resorts, its partner in the American betting market.
The FTSE 100 (^FTSE) gambling firm, formerly known as GVC Holdings, said the proposal “significantly undervalues the company and its prospects.”
Based on closing prices on 31 December, the last trading day prior to the announcement, the proposal represents a value of 1,383 pence per Entain share and a premium of 22% to Entain's share price. Its stock market value was £6.6bn at the close on Thursday.
Under the terms of the proposal, Entain shareholders would own approximately 41.5% of the enlarged company.
Entain, which also owns brands such as Coral, PartyPoker and Sportingbet, asked MGM to provide additional information for the strategic rationale for a combination of the two firms.
Shares soared 27% on the back of the news.
Entain said: "Shareholders are encouraged to take no action. There can be no certainty that any offer will be made for the company, nor as to the terms on which any such offer might be made."
MGM, which is also the owner of the Bellagio casino in Las Vegas, has until Feb 1 to make a firm offer or walk away under stock market takeover rules.
A number of US companies have shown interest in British gambling companies in recent years as the States is seen as the next big growth market for sports betting.
Caesars had already owned a 20% stake in William Hill's US operations, which also had exclusive rights to operate sports betting under the Caesars brand.
Since becoming Caesars Entertainment’s exclusive sports betting partner, William Hill opened 12 branded sports books at Caesars’ properties in Nevada, Iowa, and New Jersey.
Pending regulatory approval, the remaining sports books across the Caesars portfolio will be rebranded in the coming weeks, according to a statement by the company.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said MGM’s bid for Entain “isn’t exactly a surprise.”
“The two are working together to take advantage of the recent legalisation of sports betting in the US, a market worth many billions of dollars a year, and we can understand why MGM wants to take control of the business altogether,” he said.
“However, the deal is less straight forward than the bid for William Hill. William Hill can be neatly separated into a large UK business and a fledgling US operation. By comparison Entain is a far more global and more integrated operation – operating online gaming sites around the world as well as a high street estate. That makes folding the non-US operations into MGM or spinning them off separately a far greater challenge.
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