MGM’s bid for Entain appeared to run into some obstacles yesterday after Shay Segev announced his departure as Entain CEO.
The bid for Entain from MGM Resorts International was never going to be plain sailing and so it proved after the CEO of the target abruptly jumped ship yesterday.
Shay Segev, who has only been at his post for six months, surprised the market on Monday when he announced he would be leaving to join sports streaming outfit DAZN.
The news came at a delicate time, bearing in mind MGM only made its offer to buy out Entain last week.
The low-ball offer was rejected by Entain which said it seriously undervalued the business.
Now the man who should be leading its defense – or at least bargaining for a better offer – has received a better offer himself.
Entain said it “cannot match the rewards” that Segev has been promised by DAZN.
Diller doubts
Separately Barry Diller, the founder of tech investor IAC which is currently a major shareholder in MGM, told the Financial Times that he was “skeptical” the deal would go through.
“It would be great… but whether it happens or not, I am skeptical and if it doesn’t, I am sanguine,” he told the paper.
He said that regardless, MGM would be a leader in online sports betting and gaming in the US.
He hinted MGM might instead opt to buy out its partner in BetMGM. As with Caesars/William Hill, MGM’s stake in the joint venture also acts as a poison pill to any other buyer of Entain.
BetMGM is a leading brand on the Wedge Index and makes a plum prize.
Opportunity knocks
Analysts were split over what the news of Segev’s departure meant for future of Entain and the bid.
James Wheatcroft at Jefferies said he saw the move as a “negative” given Segev’s strong track record as COO.
“The timing is especially awkward given the ongoing situation with MGM, but we think MGM may now be more encouraged to opportunistically raise its bid.
Wheatcroft suggested MGM would likely be more successful with a bid of £16.50 a share, a further 20% premium to its previous offer of £13.83.
Diller told the FT that anyone who didn’t see the strategic logic of the tie-up was “not thinking clearly”.
Wheatcroft’s counterpart at Barclays agreed that a renewed bid from MGM was likely.
Peel Hunt analyst Ivor Jones said Segev would be hard to replace with a limited available choice. He suggested an internal appointment was likely.
Regardless, Jones said there was now “one less voice for independence” on the Entain board.
“With the departure of a CEO personally invested in delivering on the promised strategy, we believe that agreement on price with MGM becomes marginally more likely.”
