12.01.2024

by Mateusz Mazur

What’s Next for Entain? Sale Rumors Amidst CEO Search

As the 2023-2024 turn of the year approached, Entain, a giant in the global gambling industry, found itself at a crucial juncture. Following the resignation of CEO Jette Nygaard-Andersen, the company stands at a crossroads, with increasing speculation about a potential sale of part or all of its business.

Entain at a Turning Point

Let’s recall that the first signs of upcoming changes at Entain surfaced in December of the previous year, when shareholders spoke almost in unison through a Financial Times article, expressing dissatisfaction with the direction the company was headed.

The article, almost entirely planned as a critique of Jette Nygaard-Andersen’s actions, seemed to achieve the desired effect by the shareholders, as just a few days later, the then CEO of Entain resigned. This sparked a fierce battle for power and influence within the company.

Where can we pinpoint the specific flashpoints that led to Nygaard-Andersen’s departure? It’s hard to believe that the private flights of the company’s head, as described in the FT article, began to bother investors enough to take decisive steps to undermine Nygaard-Andersen’s position.

The Root of the Turmoil

One of the flashpoints could undoubtedly be last year’s decision to acquire STS. While the Polish bookmaker itself did not seem to be a problem for anyone at Entain, and there were even voices over time that it was a successful purchase, spending over £750 million to acquire the Polish operator was a certain culmination of a policy of widespread acquisitions and became its flagship example.

During Nygaard-Andersen’s tenure as CEO, Entain made 11 acquisitions for a total sum exceeding £2 billion. Among them were two particularly unsuccessful purchases – the acquisition of esports-focused company Unikrn for £50 million and the purchase of the Totolotek license for £5 million.

Jette Nygaard-Andersen rejser fem dage om ugen som international topchef: »Hvis du har passionen, tæller du ikke timer « | LederstofJette Nygaard-Andersen

The Totolotek license was supposed to be used to launch the Bwin brand in Poland, which ultimately never happened, and the company definitively abandoned any related plans in December. As for Unikrn, a little over two years after being acquired by Entain, a decision was made to significantly scale back the company’s operations, excluding its B2C operations.

Nygaard-Andersen’s reign was also marked by regulatory problems. The resignation of the former CEO occurred just a few weeks after a costly settlement with British tax authorities, worth over £500 million, intended to defer prosecution regarding bribery allegations surrounding the company’s operations in Turkey.

This was undoubtedly the highest, though not the only amount, that Entain was forced to pay in connection with regulatory violations. Not only the British but also, for example, the Dutch regulator closely watched the company’s operations, deciding to fine the company in connection with the activities of Entain’s Bet City.

These unplanned expenditures also contributed to the situation in which Entain currently finds itself. In the past, calls were often made for a radical change in the company’s strategy to avoid future regulatory troubles.

The Power Struggle Post-Resignation

Just a few days after the departure of the former CEO, the hedge fund Corvex acquired 28 million shares, or 4.4% of Entain. A significant fact in this case is that the fund is also the largest shareholder of another gambling giant, Kindred (15% of shares), and also owns shares (1.5%) in MGM Resorts – another gambling conglomerate.

When we consider the ties between MGM and Entain, which resulted in the creation of BetMGM in 2018, a joint venture between both entities, it all starts to add up. Moreover, recently many have also been asking questions about the future of Kindred, which suddenly decided to withdraw from its North American operations and intends to end its unregulated operations in many markets as part of a strategic review.

The mutual connections may prove to be particularly important in the frequently discussed issue of potential mergers or sales of Entain.

Immediately after the official announcement of the acquisition of shares in Entain, Corvex openly criticized Jette Nygaard-Andersen, stating that Entain’s financial results in recent times were “unacceptable” and that the company is currently at a “critical moment” in its operations. It was also clearly stated that the settlement reached by Entain with British tax authorities was a huge failure for the company.

After the departure of Nyygard-Andersen and the emergence of Corvex, the value of Entain’s shares increased by 14% within a week.

With the disclosure of information about Corvex’s acquisition of shares, the list of known shareholders of Entain grew to four. According to currently available information, in addition to the aforementioned hedge fund, investors also include Eminence Capital, Sachem Head Capital Management, and Dendur Capital.

Główny krytyk przejęcia STS powołany do zarządu Entain - iGaming PolskaRicky Sandler – CEO of Eminence Capital

In the turnover that took place at the turn of 2023 and 2024 in Entain, the Eminence Capital fund undoubtedly played a significant role, openly undertaking criticism of the company’s actions even at the time of the STS acquisition and it is beyond doubt that it also revealed its dissatisfaction a few months later in the article that directly contributed to Nygaard-Andersen’s resignation as CEO.

It is worth noting that Eminence Capital expressed its dissatisfaction through the voice of activist Ricky Sandler, an advocate for the sale of Entain’s shares in BetMGM. After the reshuffles at the very top of the companies, Sandler received a place on the company’s board, aimed at calming the agitated investors.

Entain in the Face of a Merger?

It’s hard not to get the impression that there is currently a game being played around Entain that is much bigger than who will sit in the CEO chair, temporarily occupied by Stella David.

Entain could have been the object of a potential transaction some time ago when MGM and DraftKings presented their offers. Ultimately, they were considered lower than the real value of the company, which, however, has since seen a significant decline.

Although the topic of selling shares in BetMGM is now more often discussed, the sale of the entire business is also not impossible. The decision regarding the choice of a new helmsman will tell us a lot about the future awaiting the company. It is enough to say that among the candidates is mentioned, among others, the CEO of BetMGM, Adam Greenblatt.

Will Entain face a merger or acquisition of the entire business? Who could undertake such an endeavor?

MGM currently seems to be the most serious candidate. Such an event would, however, have far-reaching consequences for the entire structure of Entain.

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