DraftKings makes $22.4 billion bid for UK's Entain

This Nov. 29, 2020 file photo shows a DraftKings kiosk at Gillette Stadium in Foxborough, Mass. British betting company Entain is confirming that it received a more than $20 billion takeover offer from American rival DraftKings. Entain’s stock surged nearly 6% on the London Stock Exchange on Wednesday, Sept. 22, 2021. (AP Photo/Charles Krupa, File)

The British betting company Entain has confirmed a takeover bid worth about $22.4 billion (16.4 billion pounds) from DraftKings as online gambling companies seek inroads into physical betting sites and vice versa.

Entain's stock surged nearly 6% Wednesday on the London Stock Exchange and rumors of a potential deal have more than doubled the price of its shares this year.

Entain’s portfolio of sports betting and gambling companies includes some of the U.K.’s most well known brands such as Ladbrokes and Coral. The company, formerly known as GVC, claims licenses to operate in more than 20 countries.

A tie up between DraftKings and Entain faces numerous hurdles, particularly the U.K. company's partnership with MGM Resorts International, a U.S. major casino and entertainment operator.

MGM has made its own offer to acquire all of Entain, seeking access to its online technology. That offer, worth around $11 billion, was rejected by Entain this year as inadequate.

The Las Vegas company said late Tuesday that it was aware of the DraftKings bid and that any deal with Entain would require its consent because the companies' partnership, which is called BetMGM.

“MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives,” the company said.

Sports gambling has exploded in the U.S. after the Supreme Court rejected laws prohibiting it in 2018. And the pandemic has supercharged online betting.

Casinos want access to proven online gambling technology. At the same time, online gambling sites are seeking entry into the physical space.

If DraftKings is successful in its bid for Entain, it stands to get access to physical betting locations run by the U.K. company's Coral and Ladbrokes divisions.

Yet DraftKings may be making a pure play for the online real estate controlled by BetMGM, wrote Laura Hoy, equity analyst at Hargreaves Lansdown.

“We suspect that BetMGM is a big part of the reason DraftKings is interested at all, which may mean it will look to offload other parts of the business like the Ladbrokes and Coral physical betting shops down the line,” Hoy wrote.

That has been done before by major U.S. players like Caesars Entertainment, Hoy said.

Entain, which said it had previously rejected a 2,500 pence ($34.12) per share cash and stock offer from DraftKings, said late Tuesday that the new offer is a mix of cash and stock worth 2,800 pence ($38.21) per share.

Entain said its board will review the revised offer.

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Kelvin Chan in London contributed to this report.