(Bloomberg) — DraftKings Inc., the U.S. sports-betting giant, jumped in New York trading and the British betting house Entain Plc fell after a potential $22.4 billion combination of the two companies collapsed.
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DraftKings had offered 2,800 pence a share in cash and stock for Entain, owner of U.K. bookmakers Ladbrokes and Coral. The terms represented a 43% premium over the stock price at the time and improved on an earlier 2,500 pence bid. But the U.S. company said Tuesday it won’t make a final proposal.
DraftKings was unwilling to meet some of Entain’s demands, according to a person familiar with the matter who asked not to be named because the discussions were private. Entain’s board was uncomfortable with DraftKings shares accounting for so much of the offer.
Shares of Boston-based DraftKings rose as much as 7.8% to $50.48, while Entain lost 6.3% to 2,002 pence in London.
What Bloomberg Intelligence Says:
“The decision not to make a firm offer, which was received favorably by the market, eliminates any potential equity-dilution risk from adding European brands intended to complement DraftKings’ U.S. online-sports-betting focus.”
— Brian Egger, senior gaming industry analystClick here to read the research.
Entain had other concerns as well, according a statement in mid-October, including assurances about regulatory clearances and management composition of the combined entity. The British company at the time asked the U.K. merger regulator to give DraftKings until Nov. 16 to make a firm offer.
Another issue was Entain’s joint ownership of BetMGM, a U.S. gambling venture with MGM Resorts International. MGM had tried to buy Entain earlier this year for $11 billion, but walked away rather than raise its bid. When the DraftKings bid came along, Entain and MGM began new talks on technology licensing and governance for the venture.
Under U.K. takeover rules, DraftKings had to announce its firm intent to make a deal or be barred from making a further offer for six months from the original October deadline.
“Based on our vertically integrated technology stack, best-in-class product and technology capabilities and leading brand, we are highly confident in our ability to maintain a leadership position and achieve our long-term growth plans in the rapidly growing North America market,” Jason Robins, DraftKings’ chief executive officer, said in a statement Tuesday.
Entain has been in the sights of U.S. gambling companies eager to go global since the U.S. Supreme Court in 2018 allowed sports betting to expand beyond Nevada. Casino operator Caesars Entertainment Inc. bought Britain’s William Hill in April, Ireland’s Flutter Entertainment Plc bought Stars Group Inc. in Canada last year, and Bally’s Corp. is in the process of buying Gamesys Group Plc.
MGM had made clear it wanted a seat at the table in the DraftKings-Entain talks, noting that any deal that results in a competing U.S. operation would be subject to its consent.
The key question now is whether MGM decides to make another bid, either for the half of BetMGM it doesn’t own or Entain itself, David Brohan, an analyst at Goodbody, said in a note to clients.
“The board strongly believes in the future prospects of Entain,” Entain said in a statement.
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