$22.4bn bid for Entain underlines value of British online gambling expertise

The blockbuster $22.4bn (£16.4bn) bid for Ladbrokes and Coral owner Entain underlines just how valuable British online gambling expertise has become.

Its prospective buyer, US fantasy sports outfit DraftKings, is one of the major players vying for supremacy in the fast-growing US online betting market.

This 21st-century gold rush was triggered by a landmark supreme court ruling in 2018 that overturned a long-held prohibition on sports wagers.

Individual states one by one have legalised the activity and the early pace of growth has been impressive.

According to Eilers & Krejcik Gaming – a US-based gambling research and consulting firm – the US house take from sports betting so far this year is $1.8bn, compared with $2.5bn in the UK.

They reckon the fledgling US sector could overtake its veteran UK cousin as the world’s largest regulated market by the end of 2021, boosted by the volume of NFL games in the fourth quarter.

This has all been achieved before populous states such as California, New York and Texas come on stream. Goldman Sachs has suggested that US online gambling revenues could hit $40bn by 2033.

Domestic US players emerged into this brave new world with plenty of appetite to serve sports bettors, but little expertise. This is where Britain’s gambling companies come in: the likes of Entain and William Hill have been accepting online wagers since before the iPhone was invented.

Analysts at Jefferies highlight the attraction to US predators of Entain’s “proprietary tech stack”, the modern equivalent of old-fashioned bookies’ nous.

At first, American companies were happy to borrow British expertise via joint ventures, Caesars with William Hill and MGM Resorts with Entain.

Now they want a bigger slice of the pie – or rather, all of it. Caesars was the first mover, taking out William Hill for $3.7bn a year ago.

The directors who recommended that deal – and the shareholders who accepted it – may be feeling a little queasy today, looking at Entain’s $22bn price tag.

Entain is a bigger, better company. The company previously known as GVC has a diverse and global stable of brands including bwin, PartyPoker and sportingbet, alongside 3,300 UK shops in the Ladbrokes and Coral networks.

But a year ago, few people would have assumed that its value outstripped that of William Hill by a factor of six.

The bargain-of-the-decade narrative is only strengthened by the fact that London-listed online casino specialist 888 paid Caesars £2.2bn for William Hill’s non-US operations earlier this month.

Given that Caesars paid £2.9bn for the whole business, it has effectively spent a trifling £700m to turbocharge its assault on US bettors’ wallets.

There were mitigating factors in William Hill’s capitulation. Caesars had warned Hills that their joint venture was at risk if the UK firm sold to a rival suitor, a trump card that the Las Vegas casino firm played expertly.

But Entain’s resolve stood firm in a situation with some similarities. Its own joint venture buddy, MGM Resorts, bid £8bn in January. Entain demurred and now finds itself nonchalantly declaring that it will “carefully consider” an offer worth twice that.

Two other UK firms are worth a mention. Paddy Power owner Flutter, Irish in origin but London-listed, took a different path, merging with Canada’s The Stars Group in early 2020 before buying DraftKings’ fantasy sports rival FanDuel. It is now sitting pretty as a globe-straddling colossus, master of its own destiny.

The other is Bet365, the family fiefdom of Stoke’s Coates family, which is forging its own path in the US, including via a New York mobile sports betting licence application.

As big as the Entain deal would be, the UK-US consolidation spree may well have further to run given the rewards on offer. It should come as no surprise to see the biggest players put down piles of chips that would make even the most insouciant croupier gasp.