DraftKings — one of the United States’ leading sports fantasy and online betting platforms — is reportedly lining up a major move to secure a more diversified portfolio in the online gambling market. The organization is seeking to acquire Entain, a UK-based gambling firm that has a significant presence in the US market, in a deal that could be worth $20 billion.
This would be a significant step for both companies. DraftKings is already a well-established brand in the United States. It enjoys a huge share of the market across the country. However, it is not unchallenged in this capacity, and rivals such as MGM Resorts. And Rush Street Interactive have cast doubt on DraftKings’ position near the top of the pile.
Acquiring Entain as part of a multibillion-dollar merger would go some way to securing a market-leading position. However, the deal is not expected to run smoothly.
Dissent from Entain’s Key Partners
DraftKings’ aforementioned rivals — specifically MGM — represent a significant obstacle to proceedings. MGM currently enjoys a 50/50 partnership with Entain in the form of the joint BetMGM venture. This venture effectively makes MGM Resorts the exclusive partner of Entain in the American market. The two companies operate side by side in the lucrative online sports betting and iGaming sphere.
In a statement released in September, MGM Resorts reiterated just how important this partnership is to the group’s ongoing development in these key markets.
“MGM’s priority is to ensure that it continues to capture the growing U.S. online opportunity and realizing MGM’s vision of becoming a premier global gaming entertainment company,” the statement read.
“MGM believes that having control of the BetMGM joint venture is an important step towards achieving its strategic objectives.”
Consent Required from MGM Resorts
The statement also described how any deal that would see Entain “or any of its affiliates” owning a competing business in the US market would need MGM’s full consent — a potential stumbling block for DraftKings’ acquisition and merger plan.
A stumbling block, yes, but perhaps not the dead end that DraftKings may have feared. MGM Resorts, operating under the advice and guidance of PJT Partners, recognize that they cannot simply veto the deal. As this runs the risk of harming the already lucrative relationship with Entain.
Continued Negotiations in Search of a Mutually Beneficial Deal
While the organization does have significant power, it is expected that they will wield this power with compromise and caution. The MGM statement concludes by saying that the company will “engage with Entain and DraftKings” with a view to finding a solution to the exclusivity arrangements — a solution that “meets all parties’ objectives.”
The merger between DraftKings and Entain could still take place, but the negotiations are likely to be complex.