Entain Hits Shareholder Stumbling Block in Enlabs Acquisition Deal

Author Thomas Wolf
January 21, 2021 3 min read
by Thomas Wolf

Last week, we reported on the massive $11 billion merger between UK-based Entain (formerly GVC Holdings) and American casino giant MGM.

This week, Entain hit the newsreels with its own purchase as it saw its $336 million offer for Eastern European gambling firm Enlabs falter before the final hurdles.

Despite Enlabs’ board recommending shareholders accept the offer, a group led by Texas-based Alfa Fox Capital Management rejected the deal. The group owns 11% of Enlabs’ shares collectively – enough to completely stall any deal for the time being.

Alfa Fox owns 3% of Enlabs, followed closely by Topline Capital with 2%. The remaining 6% is made of a consortium of other private investors with 1% or less each.

Highly Unusual

In our report last week, we considered the reasoning behind the abrupt departure of Entain CEO Shay Segev, who had only been in the role for seven months.

It seems Alfa Fox executives were also going down a similar line of thinking. Their open letter to Enlabs shareholders pointed out that Enlabs’ Chairman Niklas Braathen is pending for a senior executive position at Entain after the deal – just as Mr. Segev surprisingly left his role at the top of the company.

“The fact that Entain will compensate Braathen as a senior executive post-deal and that the CEO of Entain just announced his departure is highly unusual. It leads us to conclude that while this is a good deal for Entain, it is a bad deal for NLAB minority shareholders”

Alta Fox’s statement said.

Of course, Alfa Fox’s opposition to the deal isn’t because of any under-the-table agreements that may or may not have gone on. As a hedge fund, they just don’t see the value in the SEK 40 ($4.79) valuation.

The group’s 11% stake is enough to disrupt the deal because Entain needs 90% of shareholders’ approval for the takeover to go through.

Divergent Valuations

The news doesn’t come at a good time for Entain, as recent breaking news confirms that MGM has pulled out of any proposed deal.

“After careful consideration and having reflected on the limited recent engagement between the respective companies regarding MGM’s rejected all stock proposal, we do not intend to submit a revised proposal,” MGM told the UK’s Financial Times on Tuesday, January 19th.

Entain’s shares dropped as much as 18% after the news, before stabilizing towards the end of the day.

Funnily enough, Entain accused MGM of the same undervaluation that they are being accused of by Enlabs shareholders now.

With one deal gone and another potentially off the table, plus a new CEO to find over the next six months, the future suddenly looks a lot shakier for Entain.

The UK bookmaker owns Coral and Ladbrokes, as well as other high-street businesses. It hoped to join the likes of William Hill and Flutter Entertainment in forging cross-Atlantic partnerships with the booming US market.

The former ended 2020 partnering up with Caesars in a £2.9 billion ($3.951 billion) deal. Caesars became the biggest gambling company in the world after merging with The Stars Group last year and also invested heavily in a partnership with the fast-growing sports betting and online casino operator FanDuel.

For the latest updates on all the major gambling deals going on in the world, keep checking online.casino/news.

Author Thomas Wolf

Author

Thomas Wolf

254 articles

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