Were a US$11 billion-plus deal to go through for casino operator MGM Resorts International to transform its business model by acquiring online betting conglomerate Entain Plc, it could lead the MGM brand to take a smaller role in a land-based casino resort in Japan, and long-term could even see the MGM parent divest its interest in Macau casino licensee MGM China Holdings, says a Monday note from brokerage Sanford C. Bernstein Ltd.
If the Entain deal “were to be consummated we would expect MGM [Resorts] to eventually bow out (or take a much smaller role) of a Japan integrated resort development, which has been plagued by delays (partly due to Covid[-19]) and by concerns around cost,” wrote analysts Vitaly Umansky, Kelsey Zhu and Tianjiao Yu.
In July, MGM Resorts’ incoming chief executive, Bill Hornbuckle, said the firm would have a minority stake – of up to 45 percent – in a mooted resort scheme in Japan. In February, the Osaka authorities said the only qualified applicant for their request-for-proposal (RFP) phase for a casino scheme was a consortium involving MGM Resorts and Japanese financial services group Orix Corp.
Sanford Bernstein noted in its Monday memo: “While we do not see a transaction with Entain impacting MGM Resorts’ commitment to MGM China in the near term, if MGM [Resorts] chooses to focus on the digital opportunity (which we do not see forthcoming in Macau/China in the foreseeable future), MGM China may eventually be divested.”
Disposal of MGM China was “not near term” as a possibility, suggested the institution. There was however, a “low probability” scenario whereby – after new public concessions were awarded in the Macau market at some point after the expiry in June 2022 of the current ones, and assuming MGM China were a winner – “with the blessing of the Macau government, MGM Resorts sells its 55 percent stake in MGM China to a party approved by the [Macau] government.”
An MGM Resorts acquisition for Entain would be “transformative” as it would further focus the MGM Resorts brand “into digital betting, reducing its reliance on Las Vegas,” suggested Sanford Bernstein. “The combination would create a true digital and retail betting giant,” the brokerage’s analysts added.
MGM Resorts already has a 50-50 joint venture with Entain, called BetMGM, for United States-based sports betting and iGaming.
London-listed Entain has a portfolio of sports betting brands including: bwin, Eurobet, and Ladbrokes.
Entain said in a Monday press release that an MGM Resorts’ offer of GBP13.83 (US$18.78) per share, “significantly undervalues” the online wagering conglomerate’s business.
The press release added that under the proposal, Entain shareholders would own “approximately 41.5 percent of the combined company”.
In a Monday press release, MGM Resorts confirmed the details of Entain’s own press announcement.
The casino group added a deal – were it to happen – would “deliver full control of the BetMGM business to leverage the rapidly growing U.S. iGaming and sports betting opportunity”.
According to Sanford Bernstein, BetMGM generated an estimated US$150 million to US$160 million in revenue during 2020.
The U.S. casino firm said any deal with Entain would “position” MGM Resorts “as a global gaming company across both online and retail,” with “leading end-to-end technology”.
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