- Apollo looking to break up business
- Leaderless status leaves firm vulnerable
- Activist Eminence Capital has board seat
Shares in bookmaker Entain (ENT) topped the FTSE 100, climbing 5% to 826p on rumours private equity groups including Apollo are eying a potential break-up of the Ladbrokes and Coral owner after it initiated a formal review of the group’s structure amid activist pressure.
The Times newspaper suggested one such suitor could be CVC Capital, which formerly owned Sky Bet and is the majority owner of German bookmaker Tipico. Another factor stirring up recent speculation is the retirement last week (4 April) of chairman Barry Gibson who intends to step down in September.
Gibson blocked two bids for Entain from US firms MGM Resorts International (MGM:NYSE) and fantasy sports betting company Draftkings (DKNG:NASDAQ) at £13.83 and £28 respectively in 2021.
Current interim chief executive Stella David will replace Gibson once a permanent chief executive is appointed to replace Jette Nygaard-Anderson, who abruptly resigned on 13 December 2023.
The resignation followed Entain’s £585.5 million settlement of a Crown Prosecution Case relating to historic activities in Turkey undertaken by prior management.
Activist investor Eminence Capital gained a board seat in January and has criticised Entain’s board for overpaying for recent acquisitions and rejecting takeover bids at higher prices.
Eminence Founder Gerry Sander said: ‘While we can support the company pursuing seemingly rational acquisitions, funding them with highly undervalued equity is an empire-building, shareholder value-destroying strategy.’
EXPERT VIEW
AJ Bell investment director Russ Mould commented: ‘The Ladbrokes owner has previously been subject to interest from MGM and DraftKings, but neither suitor managed to place a winning bid.
‘Since then, Entain’s share price has lagged many of its peers and left it a sitting duck for a third party to swoop on the business. Entain is particularly vulnerable at the moment as the business is being run by a caretaker manager while the board searches for a permanent CEO.
‘Expect a few twists and turns if the starting gun is fired again on any bid action as there will no doubt be multiple parties interested in picking apart Entain. It already has multiple activist investors on the shareholder register and they won’t let someone casually waltz along and snap it up on the cheap.
‘Scale matters in the gambling sector and Entain has its fingers in many pies around the world, including the US which offers some of the best growth opportunities geographically for the industry.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Ian Conway) own shares in AJ Bell.
