Barry Diller’s IAC/InterActiveCorp spent more than $1 billion to acquire a 12% ownership stake in MGM Resorts International last summer on the potential for the casino giant’s online gaming business.
That focus became clear over the weekend.
MGM Resorts made an $11 billion offer for Entain PLC, one of Europe’s largest online gaming conglomerates and the casino company’s 50-50 joint-venture partner in Roar Digital, which oversees sports betting operator BetMGM. Entain’s board rejected the MGM offer as undervalued but asked for additional information on the merger’s strategic rationale.
The Las Vegas-based casino company said in a statement Monday that IAC “would potentially fund a portion of the partial cash alternative through a further investment in MGM.”
Diller, the billionaire media mogul and IAC chairman who now controls two seats on MGM’s 14-person board, alluded to BetMGM last summer when the stock transactions were first announced.
“We believe MGM presented a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a preeminent brand in a large category with great potential to move online,” Diller said in a shareholder letter that accompanied the announcement last August. “IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique.”
BetMGM had steadily grown since Roar Digital was created through a pair of $100 million investments from MGM and Entain – formerly known as GVC Holdings – in 2018. BetMGM operates retail and/or mobile sports betting in 11 states, which includes Monday’s launch of mobile sports betting in Iowa.
In an interview with CDC Gaming Reports last month, Entain CEO Shay Segev said BetMGM could be in 20 states by the end of 2021.
“We are firmly on track to be the leading operator in the U.S., as well as in many other newly regulated markets that are now opening around the world,” Segev said.
Diller told IAC shareholders in August that the potential for MGM’s online gaming business – “a portion of its revenue so small that it rounds down to zero” – drove his investment thesis.
Entain operates several European online gaming brands, including bwin, PartyPoker, Ladbrokes, Coral, and FoxyBingo.
Union Gaming Group analyst John DeCree said Monday the acquisition of Entain would allow MGM Resorts to integrate its digital gaming segment with its land-based casinos and entertainment operations. The company operates casino properties in six states, including 10 resorts along the Las Vegas Strip.
“We believe the omni-channel integration across digital and land-based gaming is a significant opportunity that is still widely overlooked by investors,” DeCree said in an investors note published by Seeking Alpha. “While Entain brings technology and experience in the digital gaming industry, there is significant value across MGM’s well-known brands, its 34 million-plus Mlife loyalty members, and top-notch land-based casinos (and market access) across the U.S.”
Credit-Suisse gaming analyst Ben Chaiken had a similar view, adding that MGM would like more control over BetMGM.
“We think the greater commitment to the U.S. online sports betting/igaming opportunity is a clear positive, with the existing joint venture not particularly (registering with investors) to MGM as part of the overall conglomerate,” Chaiken said in a research note.
The move by MGM Resorts comes three months after Caesars Entertainment announced plans to acquire United Kingdom-based sports betting giant William Hill for $3.7 billion. Caesars, which operates more than 50 gaming properties in 16 states, owns 20% of William Hill US, the British company’s American subsidiary, through a previous deal.
Analysts expect Caesars to sell William Hill’s European operations and keep the U.S. business, which currently covers 170 retail locations across 13 states with a 29% market share of all U.S sports betting. Caesars expects its transaction will close in March.
Diller, 78, founded Fox Broadcasting Co. and USA Broadcasting. He is currently No. 278 on the Forbes 400 with a net worth of $5.1 billion. He founded IAC in 1995 and is chairman of online travel giant Expedia, which acquired its holding company, Liberty Expedia, in a $2.6 billion deal in 2019.
New York-based IAC is an investment company with extensive experience in media and online commerce. Its portfolio includes Vimeo, Dotdash, and Care.com, among others. IAC also has majority ownership of ANGI Homeservices, which includes HomeAdvisor, Angie’s List, and Handy.
Shares of MGM Resorts closed at $29.72 on the New York Stock Exchange Monday, down $1.79 or 5.68%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
