Consolidation looms over the fast-growing igaming and sports wagering industries. Sportsbook operator Flutter Entertainment and mobile games supplier Skillz are both reportedly takeover targets for MGM Resorts International.
Why Is MGM Focusing on These Two Companies?
Flutter Entertainment is an Ireland-based company with a market capitalization of $32.78 billion, limiting the pool of potential suitors. Flutter also controls 95% of FanDuel, which is the company’s main presence in the United States. To increase shareholder value, the parent company plans to spin off a portion of that firm next year. Some investors believe FanDuel is worth more than rival DraftKings, which has a current market cap of $20.79 billion.
Meanwhile, Skillz has been public for less than a year but is reportedly already drawing a lot of attention from buyers. The San Francisco-based firm is one of a rising number of igaming and non-igaming companies that have come to market through mergers with special purpose acquisition companies (SPACs). As a result of this, anyone looking to buy Skillz could be catching a falling knife, as many of these companies are seeing a big drop in their stock prices. The mobile gaming company’s stock is down 47.5% this year to date, and 77% from its February highs.
For MGM Resorts International, there is a lot of potential value in both companies when it comes to taking over a larger share of the US market. In spite of this, it would likely take a large sum of money to begin negotiations.
Flutter was only recently acquired for $1.26 billion in cash, and short-term investments at the end of the second quarter suggest it may be more likely to be a buyer than the seller. MGM might instead choose to pursue smaller operators or simply wait, given it has only been a year since it acquired The Stars Group for $12 billion.
In terms of MGM making an offer for Skillz, this deal would be much simpler to make based on the current share price of the company. Skillz could be a better fit for a technology firm than MGM, with a platform centered on mobile gaming and smaller esports competitions. Still, it could make sense for the company if it’s looking to diversify its business strategy and expand into the esports market.
At the present moment, it is unclear which direction MGM will go in and whether it will acquire either of these companies. However, the US-based operator has had a great few years with the opening of the US market. If it does acquire either Flutter or Skillz, it could mean some big changes for the industry.
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