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Draftkings & Entain: The power play of all power plays

If you’re UK-based sports betting giant Entain, it feels good to be wooed. Earlier this year MGM Resorts offered $11 billion for Entain, but DraftKings has blown that deal away, dangling more than $22 billion in cash and stock for the company last month.

The size of the proposed deal cannot be understated. DraftKings is offering more money for Entain than was wagered in the entirety of the United States in 2020. Should Entain accept the offer, it would instantly vault DraftKings to the head of the pack among U.S. gaming companies in the international betting market.

Entain Has Vested Interests and Partnership with BetMGM

But there’s another wrinkle to the proposed acquisition: it would allow DraftKings to control BetMGM, which was founded in a split venture between GVC Holdings (the former name of Entain) and MGM Resorts in 2018.

This complication (the possible swallowing of BetMGM by a competitor) makes the Entain deal complex and ripe for analysis from regulators in both the U.K. and the U.S.

Would the U.S. government allow such a purchase? How could it impact competition in a country that is rapidly expanding legalized gambling and sports betting? Would MGM Resorts consider a merger with their competitor?

Any purchase of Entain, which provides the technology that fuels BetMGM’s popular sports and betting apps, may require approval from MGM Resorts. But how much influence would they have over Entain’s decision if that much money is on the table? Would a marriage (even a tenuous one) between BetMGM and DraftKings solidify both brands’ place in the growing industry in the U.K. and the U.S.?

Or would MGM Resorts seek to jettison BetMGM if Entain accepts the bid from DraftKings? If that’s the case, people in suits must be scrambling in the BetMGM/MGM Resorts offices to find a new technology partner or devise a strategy to stave off DraftKings.

DraftKings Has Options, Could Be Pushing MGM Into a Corner

It’s possible that the eye-popping DraftKings offer for Entain is a play by the company to bring both Entain and MGM Resorts to the table for a M&A discussion.

DraftKings is keeping its cards close to its vest at this time. Or perhaps DraftKings wants to force BetMGM to separate from Entain, leaving them with all Entain’s non-U.S. assets. But that assumes DraftKings wants to surrender claims to the BetMGM relationship with Entain.

As the parent company of popular European sports betting brands such as bwin, Coral, Ladbrokes, and Sportingbet, Entain is an attractive asset even without the BetMGM piece.

Some industry observers seem to think the most likely outcome of the shocking DraftKings offer for Entain will be for the three companies (Entain, DraftKings, and MGM) to hammer out an agreement that carves up the assets and interests of Entain.

In that scenario, DraftKings may get the non-U.S. business assets from Entain, while MGM retains BetMGM and the ability to license the Entain technology to keep their brand churning.

Regardless of what happens moving forward, Draftkings bid for Entain is the powerplay of all powerplays.