A Tuesday deadline came and went without DraftKings making a firm offer for Entain.
Under UK competition law, DraftKings had until October 19 to agree terms for a takeover. But Entain said Tuesday that negotiations were still ongoing and it secured approval for that deadline to be pushed back to November 16.
The deadline can be extended again if necessary, Entain said.
What are Entain and DraftKings discussing?
Entain said it was hammering out the specifics of the deal with DraftKings, beyond the $22.5 billion price tag. Entain listed five matters that needed resolving before its board would agree to a takeover.
Two of those were about its US sports betting join venture with BetMGM.
- The terms for any proposed technology supply agreement to BetMGM and MGM
- Governance rights and value protection for the combined entity’s stake in BetMGM
- Total value creation for Entain shareholders, including share of potential synergies.
- Governance and management composition of the pro forma DraftKings/Entain entity
- Deliverability of the potential transaction, including antitrust and regulatory clearances
BetMGM is key to the whole deal, given its recent success. Co-parent MGM has said it wants sole control of BetMGM, or else believes it could nix the takeover.
Entain is playing hardball
Entain appears to be taking a hard line with DraftKings, noting the it would continue to “deliver material shareholder value,” with or without a deal.
“The Board strongly believes in the future prospects of Entain, underpinned by its leading market positions, world class management team and industry-leading proprietary technology,” the company said in Tuesday’s announcement.
“Entain has an outstanding track record of growth having delivered 23 consecutive quarters of double digit online NGR growth, and a 3 year CAGR of 19% across 2021.”
How did the market react?
Entain’s share price was last up around 2% to 2,160p. The DraftKings proposal comes in at 2,800p a share, albeit with more than three quarters of that paid in stock.
DraftKings share price was last down around 1% to $48.20. The company’s stock is down roughly 20% from when the deal was first reported.
Some of that downturn can be attributed to dilution risk. If DraftKings issues vast amounts of new stock to pay Entain shareholders, existing shares would therefore be worth less.
What DraftKings said about the deal
In a statement of its own, DraftKings said it would “continue to engage in discussions and conduct more substantive due diligence and analysis regarding its possible offer.”
DraftKings also listed three benefits of a takeover, including:
- Expansion into regulated and regulating markets
- Accelerated product growth
- Innovation in new and existing verticals
Interestingly enough, it did not make reference to the Entain technology that powers BetMGM.