MGM Seeks Control of BetMGM After DraftKings Bids for Partner

in Finance

Oct 6, 2021

MGM Seeks Control of BetMGM After DraftKings Bids for Partner

(Bloomberg) -- Bill Hornbuckle, chief executive officer of casino operator MGM Resorts International, sees a path for his company to take full control of its online-gambling startup in the wake of a $22.4 billion bid for joint-venture partner Entain Plc by DraftKings Inc.

If DraftKings reaches a deal to buy Entain, Hornbuckle said he’ll seek majority control of BetMGM and access to the technology that powers the business. Under the terms of their partnership, a new owner of Entain won’t be able to operate BetMGM in the U.S. without the approval of MGM, the largest operator of casinos on the Las Vegas Strip. 

“We’d have to come to some resolve,” Hornbuckle said in an interview Tuesday in Las Vegas. “We have 50% now. I would like more. I would need more.”

Online betting has been growing quickly in the U.S. since the Supreme Court allowed sports betting to expand beyond Nevada three years ago. BetMGM has become a significant player, particularly in online casino games. Hornbuckle offered $11 billion for all of Entain in January, a price that was rejected by the board.

DraftKings has until Oct. 19 to present a formal offer to Entain under U.K. takeover rules. 

Hornbuckle, speaking during the casino industry’s Global Gaming Expo, said the actual terms of a deal between MGM and DraftKings have yet to be worked out but that the companies have several options. An agreement could involve BetMGM licensing some of the technology that powers the site from DraftKings, he said.

“There’s a lot of ways to structure it,” Hornbuckle said. “The only thing that would be successful for us is if we got control of it and had a technology that we could proceed with.” 

He added that just licensing the technology, which includes sports-betting odds and player account-management systems, isn’t a long-term solution, and ultimately BetMGM would need to develop or acquire those skills itself.

Entain didn’t comment on the possible terms of a deal and DraftKings didn’t immediately respond to a request for comment.

Macau Concessions

Hornbuckle, an industry veteran who was promoted to CEO last year, also commented on events in Macau, where local officials are looking at new terms for casino operators’ concessions there.

Shares of Macau casino operators plunged last month after the officials announced they would begin a public comment period over new terms that could include more local ownership of the casinos, potentially shorter concessions and restrictions on the amount of money casino operators pay in dividends to their parent companies. 

MGM Resorts owns 56% of MGM China Holdings Ltd., which operates two casinos in Macau. 

Hornbuckle said he wasn’t surprised with the terms being discussed. MGM China already has a local partner, Pansy Ho, who owns about 22% of the business, he said. Concession operators, such as companies that work the ferries or the airport in Macau, have government representatives on-site, so he doesn’t see a problem with that. 

It’s possible new concessions could be shortened to 10 to 15 years from 20. Companies might also be required to invest more in nongaming businesses and make payments to the government in terms of a relicensing fee.

“None of that was really news,” Hornbuckle said. “I was surprised by how the market reacted.”

No Interest

MGM isn’t interested in bidding to operate a casino in Chicago, which is seeking to award a single contract for the city’s downtown area. The project requires a license fee and a tax rate of about 40% in an overall market that already has a number of casinos.

“It’s a struggle how it all adds up,” Hornbuckle said.

MGM also recently won approval from officials in Osaka, Japan, to build a resort there. The company envisions a $10 billion project, in which it invests about $2 billion for a 40% stake and runs the operation. The project still needs approval from Japan’s central government, which Hornbuckle said could come next year. 

https://www.bnnbloomberg.ca/mgm-seeks-control-of-betmgm-after-draftkings-bids-for-partner-1.1662789