Entain slumps as MGM pours cold water on takeover hopes
By Geoffrey Smith
Investing.com -- Shares in Entain (LON: ENT ) tumbled nearly 10% in morning trading in London on Thursday after MGM Resorts (NYSE: MGM ) quashed any hopes that it would buy out the British-based bookmaking group.
Entain's stock price has been supported for months by hopes that MGM would build on their existing partnership with a full takeover. However, MGM decided it could grow its online betting business better with the technology of Swedish-based LeoVegas, which it bought last September.
"The simple answer on Entain is no, we've moved on," MGM chief executive Bill Hornbuckle told an analyst call after presenting the group's quarterly results late on Wednesday. "We're gonna go down in our own direction, and we began to allocate capital."
BetMGM's online sportsbook has been a big source of revenue growth for Entain but has yet to make a profit and has been a drain on the U.K. group's cash flow. Entain said at its last quarterly results that it would end financial support for the operation once it became profitable. Its earnings before interest, taxes, depreciation, and amortization are expected to turn positive in the second half of this year.
BetMGM remains by far the fastest source of growth for Entain, with revenue up 71% on the year in the fourth quarter, thanks to new openings in more U.S. states. However, whether it can sustain that growth as MGM's own interest in the venture cools is unclear.
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