IAC Approves Proposed Entain Deal

The largest IAC/InterActiveCorp shareholder of MGM Resorts International has approved the proposed Entain deal, suggesting that its additional investment in the company may be up to $1 billion for this reason.

Last week, the company announced a proposed bid of 0.6 shares for each Entain share, which, on the basis of the trading prices on 31 December 2020, reflected a value of 1,383 pence for each Entain share and a 22 percent premium on the share price of Entain.

Again remembering that despite its update “there can be no certainty” about any subsequent company bid, it was suggested that Entain shareholders could also be made available with a partial cash alternative.

Letter of intent

In its letter of intent, the IAC suggested that, because of its confidence in the group and its prospects, it would be able to consider financing a portion of the partial cash alternative through a further investment in MGM.

It was said in a media release that: “In accordance with Rule 2.10 of the UK’s City Code on Takeovers and Mergers, MGM confirms that, it has received a non-binding letter of intent from IAC/InterActiveCorp, MGM’s largest shareholder with interest in 59,033,902 MGM shares, setting out IAC’s support of the proposed transaction.”

Pure play omni-channel global leader

In addition to praising an acceleration of growth and market penetration of MGM and Entain’s BetMGM US joint venture, IAC says the business combination would ““position the combined company as a pure play omni-channel global leader in gaming and entertainment.”

The New York headquartered IAC adds: “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.”

It was further noted that a strong balance sheet and robust annual free cash flow generation would also allow the combined company to pursue its growth goals aggressively, such as the penetration of the US online market, new developments in key international gaming markets, potential M&A and shareholder return of capital.

Investment thesis to drive MGM’s penetration

To date, with an initial investment thesis to drive MGM’s penetration into the $450bn global gaming industry, IAC has invested around $1bn in MGM. The group will continue to “to strongly support this objective for MGM whether or not a transaction with Entain is consummated,” it was noted.

Under Rule 2.6 of the City Code on Takeovers and Mergers, MGM shall either declare a firm intention to make an offer for Entain in compliance with Rule 2.7 of the Code by 5 pm on 1 February 2021 or announce that it does not plan to make an offer.