The news broke that MGM Resorts and Britain’s GVC were in the process of completing a deal to offer online sports betting in the US over the weekend. MGM confirmed the partnership late Sunday evening.
“With MGM Resorts’ expertise and leading position in key markets across the U.S., this historic partnership will be positioned to become the instant leader in technology, market access, sports relationships and brands,” said Jim Murren, Chairman and Chief Executive Officer of MGM. “We are excited to benefit from GVC’s proprietary, best-in-class technology, digital customer acquisition expertise, and experience with adapting to new operating environments. GVC is unusually qualified due to their existing operations in the U.S.”
According to a press release, “the new venture will have exclusive access to all U.S. land-based and online sports betting, online real money and free-to-play casino gaming, major tournament and online poker, and other similar future interactive businesses – facilitating entry into multiple digital gaming verticals under the playMGM and partypoker headline brands.”
Sky News reported that the deal would involve each company putting up $100 million in a partnership that would last 25 years.
According to Sky, each side will have a 10-year option to buy out the other and somewhat less believably, Sky quoted “insiders” saying that the partnership may even lead to a merger between the two companies.
GVC owns Sportingbet, partypoker, Bwin, and since a £3.2 billion ($4.2 billion) takeover completed in March this year, Ladbrokes/Coral.
MGM owns 13 properties in Las Vegas plus casinos in Michigan, Maryland, Mississippi and New Jersey. Two more are on the way in New York and Massachusetts. Thanks to an agreement between MGM and Boyd Gaming announced Sunday evening, this deal will expand the online and mobile gambling reach of the two casinos and GVC to 15 states.
Deal roots trace back to 2011
Seven years is a long time in internet gambling, but back in 2011, the then Co-CEO of Party Gaming, Jim Ryan headed over to the US to pitch to prospective partners.
Just six months after the DOJ virtually shut down the US online poker industry on Black Friday, Ryan was thinking long-term about PartyPoker’s return to the US. He told Forbes:
“My focus is on the US. Even though there is no guarantee that online gaming will ever regulate in the U.S.”
The groundwork put in by Jim Ryan morphed into a deal with MGM to launch in Nevada when state-regulated online poker was first legalized.
That one didn’t come off, but by the time online gambling launched in New Jersey in November 2013, MGM and PartyPoker were in business.
At the time, the Borgata was a 50/50 venture with Boyd Gaming, and they teamed up with Party to offer online casino and poker in the Garden State. Since launch, MGM has bought out Boyd, and the partnership with Party has generated more than $200 million.
By the time the New Jersey market launched, Jim Ryan had left Party, but he didn’t abandon his enthusiasm for the US market. Today he is CEO of the company running Pala Poker and Pala Casino in New Jersey.
Not that the relationship between MGM and Party has been all wine and roses. Revenues from online poker, in particular, have disappointed ambitious early expectations, and the PartyPoker/Borgata network lags behind PokerStars and WSOP/888 by some distance.
GVC is MGM’s ideal partner for PartyPoker
PartyPoker is also no longer a standalone company. It was bought by GVC in an audacious reverse takeover.
GVC CEO Kenny Alexander began as an accountant at Sportingbet, but a series of promotions saw him become the CEO of GVC after it purchased the early online gambling business.
He has successfully completed the acquisitions of Party and now Ladbrokes, creating a business with a strong online sports betting presence as well as a chain of retail sports betting locations throughout the UK.
In a sense, today’s GVC is his baby. And for MGM, the takeover and growth of GVC has created an extremely capable and credible partner now that state-regulated sports betting is spreading across the US.
Despite owning Bwin, the old PartyPoker didn’t have the strength in sports betting to do a deal like this. But after its history of acquisitions, GVC is perfectly poised to take advantage of the current opportunities MGM can offer.
Jim Murren and Kenny Alexander: MGM’s lion vs. the British lion
As noted above, Sky News’ suggestion that this deal could lead to a merger between GVC and MGM doesn’t have quite the right feel.
True, the businesses do complement one another, but they do so by being completely different. Harnessing an online business, MGM’s casino and hotel business and GVC’s retail betting shops into a single entity wouldn’t necessarily work.
Scale is important in the modern gambling environment, if only to minimize the burden of regulatory compliance across multiple jurisdictions.
But on the face of it, putting together MGM and GVC wouldn’t be creating scale in a way that would lead to more efficiency.
Then there is the personal angle. Kenny Alexander has proven himself to be an acquirer of businesses even when they are bigger than GVC.
At 49, he doesn’t sound as if he’s in any hurry to sell out and cash in his phenomenal pay package. Sipping cocktails while idling in the Caribbean isn’t his style.
Similarly, Murren is only 56, and he too has plenty of ambition and a strong record of acquisitions.
After taking over as chairman and CEO of MGM in 2008, Murren has completed $15 billion worth of acquisitions including Primadonna Resort & Casino in 1998, Mirage Resorts in 2000 and the Mandalay Resort Group in 2005.
MGM’s world-famous symbol is the roaring lion. Britain’s traditional symbol is the rampant lion. These two executives are both corporate lions.
This deal makes eminent sense if they are planning to hunt together, but in a merger there can be only one alpha male. Better if they don’t create a situation where they have to fight it out.