Could Entain Bid Again Be On The Table For BetMGM?

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MGM Resorts found some extra cash in the couch cushions that could spur another important acquisition to help BetMGM.

Talk of an MGM acquisition of Entain reheated when news of the MGM Growth Properties sale emerged Wednesday morning. Those talks cooled substantially after earlier this year when Entain rejected an $11 million bid in January.

The two companies are 50-50 partners in BetMGM and MGM CFO Jonathan Halkyard said both companies remain committed to the joint venture.

MGM CEO Bill Hornbuckle said during Wednesday’s earnings call that he remains excited about the joint venture, and did not shy away from an analyst question about mergers and acquisition ambitions:

“We have expressed desires in digital,” he said. “And the obvious, I must say, our strategy doesn’t refer and hint simply on one other company. We are very excited about our JV with BetMGM and we continue to grow that. We have a great working relationship with that, and it’s productive.

“And we’ll continue to look. … And so, we’re going to be disciplined about the approach.”

BetMGM maintains top billing

BetMGM appears to be a priority for MGM Resorts International.

Hornbuckle singled out digital operations, which includes BetMGM, as a key investment area. That statement followed Hornbuckle explaining how the $17.2 billion sale of MGM Growth Properties keeps MGM “asset light” and flexible.

“[The deals] allow us to intensify our focus on maximizing growth in our core business and pursuing opportunities that align to our long-term vision,” Hornbuckle said. “In terms of such opportunities, we remain committed to our sports betting and iGaming joint venture, BetMGM, which continues to impress.”

MGM received $4.4 billion in cash for its stake from the sale. Hornbuckle said the company now has $11.6 billion in domestic liquidity.

For the quarter, the company reported $2.3 billion in consolidated net revenue, up 683% year-over-year, and a consolidated operating income of $264 million, up from the $1 billion loss a year ago during the height of the pandemic.

BetMGM second-quarter results

Hornbuckle and Halkyard discussed BetMGM’s strong second-quarter performance in iGaming and sports betting.

BetMGM secured 24% of the digital market where the app is live, including its 30% iGaming market share. Its market share for online sports betting is 17% in active jurisdictions.

The joint venture with Entain generated $194 million in net revenue for the quarter, up 19% from the first quarter. Halkyard said those numbers were strong because they came during a slow sports schedule and without any major market launches.

MGM’s share of BetMGM resulted in a second-quarter loss of $46 million. BetMGM’s expected capital consumption this year is $450 million, the highest planned amount for cash usage.

Looking toward better performance in 2022

MGM projects BetMGM will generate $1 billion in 2022 net revenue. Growth in iGaming and new sports betting markets are the reasons the executives are bullish on the revenue projection.

The app is live in 13 states and BetMGM has market access in 24 states, with 20 live states expected within the next 12 months.

States for BetMGM growth included in an investor presentation:

Despite its conspicuous absence in an investor presentation map, Hornbuckle mentioned Arizona as a market around the corner during the earnings call. The map did not hint toward a market access partner in Arizona, but at least 10 potential licensees are without a sports betting operator partner.