Reports emerged in September 2021 of a move by DraftKings to purchase Entain. It is believed the value of the acquisition will be around $20 billion, which is close to the size of DraftKing’s current market cap. The news of the potential deal had a significant impact on the share prices of the two companies but what is it about Entain that makes DraftKings want to spend $20 billion to acquire the company?
The online gambling industry in the United States has hit new heights in recent years. The change to the regulations means online betting is fast becoming legal across the country, with states passing legislation to allow people to bet online in a safe way. One of the biggest names in online betting in the US is DraftKings and thanks to their involvement in online fantasy sports, the company was well placed to launch an online sportsbook and casino when the regulations changed.
However, despite being one of the leading names in online sports gambling, DraftKings does not have a firm grip on the market. Several online gambling companies, some new and others already established in Europe, want a slice of the pie and this has increased competition for DraftKings. According to Alex Windsor, chief editor at gamble-usa.com BetMGM has become one of the most popular operators in the licensed US market and Rush Street Interactive is another online gambling company that has been growing quickly in the United States.
Interestingly, one of the reasons why DraftKing’s move for Entain may not work out is because of BetMGM. MGM Resorts International holds an exclusive deal with Entain in the US online sports gambling market. DraftKings is considered a competing company for MGM Resorts International and would therefore have to agree for the acquisition to take place. This complicates matters for DraftKings, and it will be interesting to see how things work out in that regard. Will MGM Resorts International be willing to come to sort of agreement with DraftKings to allow the acquisition to happen and if so, what will that entail?
However, perhaps the main reason DraftKings is so keen to buy Entain is because of their foothold in the European online betting market. Entain holds gambling licenses in 27 countries on five continents and DraftKings may not be looking to expand their portfolio in the United States, the company may be looking further afield. That being said, DraftKings is not going to pay a substantial amount of money and not take control of the US side of the business. Whichever way you look at it, MGM has a strong hand to play in any deal and it could be them that ultimately allows the deal to happen.
One of the reasons why DraftKings is keen to, but Entain is because it will give them the opportunity to buy out MGM. This would see MGM receive a significant payment and even shares in DraftKings. As for DraftKings, they would gain a huge foothold in the US online gambling market. However, this would take significant sums of money and stock, which is something DraftKings would not be willing to entertain.
If the main motive for DraftKings to acquire Entain is their non-US operations, it could leave the US side of the business to MGM. MGM could buy out the other half of BetMGM and this would see them retain control of the US side of the business and allow DraftKings to have the non-US side of the company. DraftKings already has a good market share in the US and if the overriding intention for acquiring Entain is the non-US business, this deal could work.
Leave a Comment