The new wave in the B2B sector involves acquiring other businesses to increase market share. One of the latest developments from this side of doing business is the recent DraftKings acquisition offer of Entain. Based in the United Kingdom, Entain is a shareholder in BetMGM. In fact, its 50% stake in the business makes it the majority shareholder in the gambling operator’s business.
Other businesses where Entain has interests include Ladbrokes, Bwin, PartyPoker, Coral Brands and SportingBet. According to a CNBC source, the offer that has been placed on the table by DraftKings is worth $20 billion. If the deal goes through the offer amount will be spread over cash and stock in the sportsbook’s operator business.
What we cover
US offering to take over UK for $20 billion
The operations of DraftKings can currently be experienced in 14 states because those are the regulated areas that the company has expressed interest in. Arizona is currently the youngest location based on when the sportsbook was setup there. The timing of the Arizona launch was quite timely because it preceded the start of the NFL season.
Investors are keen on learning new ways to make money and the Entain strategy did not go unnoticed. The first indication that the market was really paying attention was the share price rise by close to 20%; the shares of DraftKings on the other hand dropped by 8%.in the meantime, there is coy play from Entain about there being a merger deal in the pipeline.
Earlier on in the week, a statement was released by the management of Entain through the London Stock Exchange, acknowledging the receipt of an acquisition offer from DraftKings. Even though the statement did not quote the exact value of the deal, it mentioned Oct. 19 as the deadline for DraftKings to close the deal. By this date, it should be clear whether the offer will go through or be cancelled altogether; this is according to UK Takeover Code (Rule 27).
What the future will look like if the merger goes through
If Entain becomes an entity under the management of DraftKings, the sportsbook’s influence in the UK market would be felt almost instantly. The hand of DraftKings would also be actively involved in running partner operations that Entain has been maintaining such as Coral and Ladbroke.
At the beginning of the year, MGM Resorts International had offered to acquire Entain at a cost of $11 billion which the UK operator turned down. The two parties in the offer proposition had common business interests in the BetMGM venture and Entain definitely felt that the company had been undervalued. DraftKIngs is now offering the exact same deal at nearly double the price offered by MGM; if Entain finds the offer respectful, a deal could result but the company is yet to respond.
A huge sports betting combination
When the Supreme Court in the US lifted the nationwide ban on sportsbetting, this marked the beginning of a territory scramble. This is the reason DraftKings has operations in 14 states; a number is likely to increase as more states regulate their gambling laws. Judging from the business current environment, this scramble has now taken a new twist; companies are eagerly looking for ways to control the market.
The betting industry is without a doubt quite competitive and states such as New Jersey have over the last 3 years approved the operations of tens of gambling operators. The Covid-19 pandemic demonstrates that business fortunes can change in an instant; the only survival tactic for most investors is to buy out others for a larger share of the market.
There is a new wave of conducting the betting industry in the United States known as consolidation. From a period where businesses raced to acquire operation licenses to carry out business in certain jurisdictions to the new era where businesses are forming alliances to enhance their presence in the market, the trend is gradually picking up. Towards the end of last year, Flutter Entertainment took over control of 95% stake in FanDuel. This is not the first company acquired over time; others are Paddy Power, FOXBet and Betfair.
A few months before that, in April, Caesars Entertainment took over William Hill following a business acquisition deal. After transfer of ownership in this case, Caesars retained the assets that William Hill had in the US but sold off offshore properties to 888 Holdings. By the time William Hill was bought out of the market by Caesars, the sportsbook had in its own capacity acquired CG Technology’s sportsbooks in the Bahamas and Nevada.
In another similar setup that happened barely a month ago, Penn National took over theScore and all its operations. The company, which is based in Canada, had an active sportsbook operation in the states of New Jersey, Colorado, Iowa and Indiana.
This trend is definitely a good idea for the big bucks operators who can afford to channel a significant chunk of their budget to acquiring another company. As would be expected, the mergers and take-overs have already caught the eyes of industry regulators. The major concern as the expansions took over the gambling sector lay in the unprecedented expansion of the industry in a very short period of time; is it necessary to mitigate the rise of a monopoly?
On the table right now is a big player bidding to take over the operations of another equally big player. While the issue of monopolizing a market is real in whatever angle it is looked at, the potential for businesses to operate within a certain caliber changes the entire ballgame.
Final Thoughts
It is still too early to predict what the betting scene in the US will look like in the next five years considering that what we see now is as a result of just 3 years of work. It is a matter of strategizing and forming alliances that will keep the operators competitive regardless of the market forces. Indeed Covid-19 has played a part in pushing investors to get ready for the unseen.
