Draftkings is making a $20 billion push to acquire a British online sports betting giant.

Bid is complicated by relationship with MGM

Draftkings is making a $20 billion push to acquire British online sports betting giant Entain PLC, a move that gaming analysts say could spur MGM Resorts International to revamp its bid to acquire all or part of its joint venture partner.

The proposal, first reported by CNBC, includes largely Draftkings stock and some cash to acquire Entain, which jointly owns BETMGM with MGM in a 50/50 venture.

Earlier this year, MGM made its own pitch to acquire Entain and take full ownership of BETMGM, a sports betting and online gaming platform. But that proposal, valued at roughly $11 billion, was rejected by Entain, which said the proposal undervalued the company.

Draftkings’ bid comes as MGM pushes to expand its igaming footprint across the country as U.S. operators maneuver for a share of the booming sports betting market since the federal ban was struck down in 2018.

In a statement Tuesday, MGM noted that as Entain’s exclusive partner in the U.S., any transaction that would cause Entain or its affiliates to own a competing business in the U.S. would need MGM’S consent and reiterated the online betting platform’s importance to MGM’S goal of becoming a “premier global gaming entertainment company.”

“MGM believes that having control of the BETMGM joint venture is an important step towards achieving its strategic objectives,” the company said. “MGM will engage with Entain and Draftkings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”

Entain confirmed in a filing with the London Stock Exchange that it had received a proposal from Draftkings.

“There can be no certainty that any offer will be made for the Company, nor as to the terms on which any such offer may be made,” the company’s board said in the filing. “A further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.”

After Entain rejected its proposal in January, MGM said it was backing out of plans to acquire the company. But Draftkings’ push could change those plans.

Barry Jonas, an analyst with Truist Securities, said in a note Tuesday that while MGM could make its own bid to fully acquire Entain, it makes more sense for it to simply buy Entain’s 50 percent share of BETMGM.

“MGM owning all of its online business would be a clear long-term positive, in our view, though price would obviously be an important factor,” Jonas said.

Chris Grove, managing director of sports and emerging verticals for research company Eilers & Krejcik, said that Draftkings’ bid “forces MGM to confront their relationship with the joint venture and likely accelerates any desire they have to acquire full control over their destiny when it comes to sports betting and online gambling.”

While MGM has been clear on BETMGM’S role in the company’s future growth, Grove said that the proposal from Draftkings makes things a bit more cloudy.

“The path forward for BETMGM is to be determined. There are a number of ways that this could go,” Grove said. “The offer itself is so unprecedented that predicting the impacts of the offer is exceptionally tricky.”

Vying to expand sports betting

Multiple gaming companies, including MGM, have pushed to expand their footprint in the sports betting and igaming spaces since the Supreme Court’s 2018 decision opened the door to allow sportsbooks across the country.

BETMGM currently operates in 16 markets (15 states plus Washington, D.C.).

MGM CEO Bill Hornbuckle said earlier this year he expects it to be operational in 20 states by year’s end.

In April, Caesars Entertainment acquired U.K. sports betting giant William Hill for roughly $4 billion.

The company has since rebranded those assets under its Caesars Sportsbook brand, and Caesars CEO Tom Reeg said in August that the company plans to invest more than $1 billion over the next 2½ years to build its customer base within the sports betting market.

Overall, Grove said the proposal from Draftkings shows how transformative the U.S. sports betting and online gambling markets have become in recent years.

“The idea that even three or four years ago of Draftkings even being in the position to absorb one of the largest online gambling operators in the world would have been farfetched at best,” Grove said. “Today the conversation is more around the strategic rationale for it as opposed to the fundamental viability.”