Ladbrokes owner Entain rejects £8.1bn proposal from MGM

Entain has rejected a proposed offer from its US partner MGM Resorts International valuing the owner of Ladbrokes at about £8.1bn.

The FTSE 100 company said MGM had proposed paying 0.6 MGM share for each Entain share. Based on Friday's closing prices the proposal values each Entain share at £13.83 - a 22% premium.

Entain, which changed its name from GVC in December, said it had told MGM the proposal "significantly undervalues" the company. The group, which also owns sports betting site Bwin and online gaming brand Partypoker, has asked for more information about the strategic rationale for combining with the US hotel and casino operator..

Under the terms of the proposal Entain shareholders would own about 41.5% of the combined company. MGM has also said a limited partial cash alternative would be made available for Entain shareholders.

Entain shares jumped 27% to £14.38 at 08:32 GMT as investors bet that on a higher proposed bid for the company. US gambling operators are competing to build online businesses as restrictions ease. Entain and MGM formed a joint venture in 2018 to pursue US sports betting opportunities.

"There can be no certainty that any offer will be made for the company, nor as to the terms on which any such offer might be made," Entain said.

MGM's share-based proposal replaces an earlier cash approach worth about $10bn (£7.3bn), the Financial Times reported. Media mogul Barry Diller's IAC is backing MGM's push to buy Entain and is prepared to provide $1bn to finance the deal, the FT said.

Shore Capital analyst Greg Johnson said the proposal undervalued Entain's core business and its opportunities in the US.

"We also, like Entain, struggle to understand the strategic rationale of a full tie-up with a predominantly land-based operation in MGM at this stage," Johnson said.

Under City takeover rules MGM has until 17:00 on 1 February to announce its intention to make a firm offer.