IAC Could Double MGM Stake to Support Entain Takeover


Posted on: January 8, 2021, 12:34h. 

Last updated on: January 8, 2021, 01:53h.

Barry Diller’s IAC/InterActiveCorp (NASDAQ:IAC) is voicing support for MGM Resorts International’s (NYSE:MGM) takeover bid for Entain Plc (OTC:GMVHY). It’s possible the internet company could pony up some capital for an increased offer.

IAC MGM
IAC founder Barry Diller. His company could boost its MGM stake to help with an offer for Entain. (Image: CNBC)

Earlier this week, the Las Vegas-based casino operator bid $11.06 billion for Entain, its partner on the BetMGM iGaming and sports betting business. The British bookmaker said the offer isn’t adequate. MGM is proposing a transaction in which Entain stakeholders would receive 0.6 shares in the suitor for each share of the target they own, meaning Entain investors would own 41.5 percent of the combined company.

A higher offer hasn’t been publicized as of yet. But MGM said it’s possible that IAC, its largest investor, could contribute a cash alternative to the bid in the form of another investment in the casino behemoth. Diller’s company took a $1 billion stake in MGM last August, equivalent to 59.03 million shares, or 12 percent of shares outstanding.

The future of gaming will be omni-channel, and the long-term winners in global gaming will deliver customers compelling digital and physical experiences under one brand and loyalty program and will leverage customer acquisition spend across a holistic consumer journey in gaming,” said MGM in a statement referencing a letter it received from IAC.

Per UK protocols pertaining to mergers and acquisitions involving public companies, MGM was compelled to divulge receipt of the “non-binding letter of intent.”

Important Backer

IAC has an established record of success with internet businesses, including ANGI Homeservices, Expedia, Match, and Ticketmaster. Many market observers believe it was BetMGM that lured the company to the MGM investment in the first place, with land-based casino exposure being a sweetener.

In the aforementioned letter to MGM, IAC indicated it’s willing to contribute a portion of cash for the Entain offer and that support would come by way of another investment in the Bellagio operator — something both companies must agree to.

“IAC further indicated in its non-binding letter of intent that it is IAC’s current intention that IAC’s additional investment into MGM for these purposes could be up to US$1 billion,” according to the statement.

In the letter of intent, IAC says the global gaming market is valued at $450 billion, and it will support MGM’s ongoing efforts to bolster market share with or without a deal for Entain. Diller and IAC CEO Joey Levin occupy seats on the MGM board.

Approaching Deadline

By revealing the offer for Entain and the emergence of an activist investor pushing for a partial sale of its MGM China equity, it’s been a busy start to 2021 for the Mirage operator, and things may not slowdown anytime soon.

Per UK regulations, the company has until 5 p.m. local time on Feb. 1 to either confirm it’s making another bid for Entain, or that it’s scrapping the idea. That deadline can be extended, but approval is needed.

Entain owns well-known brands, such as Coral and Ladbrokes, and does business in over a dozen countries, making it an attractive target for suitors. But as of today, there’s no confirmation that any bidder besides MGM is mulling a run at the company.