Eminence Capital described Entain’s acquisition of STS Holdings as “disruptive to shareholders”
Eminence Capital, a New York-based investment firm, has published an open letter to Entain’s board of directors, expressing dissatisfaction with the proposed acquisition of STS Holdings by the gambling giant.
Important shareholder
Currently, Eminence owns approximately 13.2 million Entain shares, which accounts for about 2% of all outstanding shares. The letter itself is a sharp criticism for Entain’s purchase of STS.
The American fund believes that Entain’s actions in this case are illogical and the price is inflated. What’s more, Eminence points out that Entain’s shares fell by more than 8%, losing £650 million in market value – close to the amount which have to be paid to acquire a Polish bookmaker.
Attack on Entain’s management board
The letter contains several direct expressions addressed to Entain’s management board. There were even words like: – Management either doesn’t understand finance, or worse, believes that shareholders are naive. While we can support a company in its pursuit of seemingly rational acquisitions, financing them with highly undervalued capital is a strategy to build an empire and destroy shareholder value.
The investment firm says it broadly supports mergers and acquisitions – highlighting Entain’s potential transfer of its shares in BetMGM. However, in the case of STS, Eminence believes that the whole transaction is in no way logical.
Lack of faith
Eminence Capital also warns that shareholders are losing faith in Entain’s ability to allocate capital and create long-term value, which could make them likely to support the sale of MGM at a much lower price than previously assumed.
Without a doubt, it should be noted that the letter, signed by Eminence’s CEO Ricky Sandler, is a direct attack on Entain’s management board. The publication contains specific accusations, as well as possible consequences of the takeover of the Polish bookmaker by a gambling tycoon.
Time will tell whether Entain’s board will decide to respond to Eminence Capital’s appeal, which may have certainly worried shareholders.
