MGM finally announced the acquisition of a global online gambling operator on Monday. It just was not the one that everybody expected.
MGM said Monday it made a $607 million offer for Nordic gaming operator LeoVegas. MGM CEO Bill Hornbuckle hinted at a global acquisition last quarter. However, analysts assumed that portended another attempt to buy BetMGM-partner Entain.
Who is LeoVegas?
LeoVegas is listed in Stockholm, and best known for its online casino product. It also has a sportsbook, powered by Kambi.
The operator has licenses in eight jurisdictions, primarily in the Nordics and rest of Europe.
It also gets around a quarter of its revenues from .com markets, including Latin America.
Why is MGM buying LeoVegas?
MGM gave three key drivers for its offer:
- Expanding MGM’s online gaming business around the world
- Bringing in a strong online gaming management team and casino tech stack, including PAM and wallet
- Immediately accretive to earnings
Will LeoVegas accept?
As for LeoVegas, the company’s board has recommended the offer to shareholders. Likewise, shareholders holding 15.1% of the company have said they will accept the offer.
Those backers include LeoVegas founder and largest shareholder Gustaf Hagman.
The transaction could close in the second half of this year, MGM said.
Reading between the lines
Not everyone bought MGM’s deal rationale at face value however.
Analyst firm Regulus Partners suggested the deal could help MGM extricate itself from the BetMGM joint venture with Entain. Regulus said in a note this morning:
“The narrative is of a complementary non-US strategy, but by owning LeoVegas, MGM will clearly compete with Entain everywhere but the US. The three will also be going head-to-head in Canada.
“While from an operational perspective, that is valid enough, it is likely to ratchet up strategic tensions. MGM seems set to own its own digital capability on a global basis one way or another, meaning the LeoVegas bid looks like a much more strategic play than an operational bolt-on.”
Could MGM ultimately try to take the BetMGM brand to the LeoVegas tech stack? That partnership would still be missing the sportsbook engine however.
MGM looking at the long game?
Regulus noted LeoVegas was not on the same level as Entain in terms of sports betting and poker.
However, MGM and Entain have thus far failed to resolve the “inherent instability of the JV” through various M&A options. As such, MGM doing its own thing through LeoVegas might be the simplest option.
The analyst added: “It is unlikely the story will end here.”
How did the market react?
MGM stock was last up 1% to $41 following the announcement.
The company reports Q1 results after market close on Monday.
Entain stock was not traded Monday because of a UK bank holiday.