Entain‘s (LSE: ENT) share price has returned 54% year-to-date, excluding dividends. Over the past year, the stock’s returned a staggering 124%. Over the past five years, it’s added nearly 200%.
The company, formerly known as GVC Holdings, has perfected a buy-and-build strategy over the past decade. By snapping up assets worldwide, the enterprise has grown from a small challenger into one of the most important online gaming groups in Europe.
And now it looks as if it’s attracted the attention of international buyers.
Entain share price buyout
Last week, it emerged the business had received two offers from US company DraftKings. The first offer of £25 a share was rejected. Management’s still considering the second, a mix of cash and shares with a value of £28 a share.
This is the second time in nine months Entain’s been approached. In January, casino giant MGM Resorts made an $11.1bn (£8.1bn) bid for the group after its initial offer of £7.3bn was rejected. DraftKings’ proposal values the enterprise at around $22bn.
So, what does this all mean for the Entain share price? Well, whatever happens next, it’s clear the company has potential. If management gives the green light on the £28 per share offer, investors will receive a substantial premium from the current £21.80 stock price.
And if no offer’s agreed, then I think the company will continue to build on its successes over the past few years.
US gambling giants have been so eager to get their hands on the group because of its growth potential in this market. Entain has a joint venture with MGM. This could help it capture a significant chunk of the US sports betting market. The market could be worth as much as $20bn by 2025, according to estimates.
Entain also has a strong presence in many European markets. So it has the technology and experience required to succeed in the US.
As such, I believe that even if no offer’s agreed on, the company will continue to grow, and this may only drive the Entain share price higher.
Risks and challenges
Having said all of the above, the online gambling market’s heavily regulated. Regulators have kicked companies out of markets before, and they could do it again. It’s also incredibly competitive, especially in Europe. Entain has been able to take advantage of this competition in the past to snap up smaller competitors, but there’s no guarantee this will continue.
Despite these risks and challenges, I think the outlook for the group’s favourable in the long run. As long as management continues to do what it’s done in the past, I think the enterprise will continue to expand.
Therefore, I’d buy the stock for my portfolio, no matter the outcome of the current bid situation.
