MGM dismisses Entain acquisition as it turns focus to other assets across the globe

MGM officials announced during Wednesday’s earnings call they would not try to acquire Entain, its 50/50 joint-venture partner in BetMGM.

Topline numbers

MGM reported Record Adjusted Property EBITDAR in 4Q and full year 2022 for its Las Vegas Strip resorts and regional operations, according to Wednesday’s earnings report. It was MGM’s fifth consecutive quarter of record-breaking Las Vegas Strip adjusted property EBITDAR.

The company’s consolidated net revenues were $3.6bn, an increase of 18% compared to the prior year quarter. Q4 2022 included the operating results of The Cosmopolitan, which was acquired in May 2022, and partially offset by the disposition of The Mirage in December 2022.

MGM officials attributed the improved results over the prior year quarter due to an increase in business volume and travel activity along the Las Vegas Strip as well as the company’s regional properties.

The company’s diluted earnings per share of $0.69 in Q4 2022 compared to $0.23 in Q4 2021. Adjusted diluted earnings per share was a loss of ($1.53) in the current quarter compared to Adjusted EPS of $0.12 in the prior year quarter.

News nugget

MGM will be looking to acquire European gaming operator Entain, its 50/50 joint venture partner in BetMGM.

“I think it’s time to be definitive and give a little direction; the simple answer on Entain is no, we’ve moved on,” CEO Bill Hornbuckle said Wednesday.

Hornbuckle said the company will continue to focus on developing its LeoVegas iGaming brand internationally as well as looking to spark future growth with BetMGM domestically. The operator has the No. 3 market share for US sports betting gross gaming revenue but is the national leader in GGR for online casino gaming, which has higher profit margins than sportsbooks.

Speculation had swirled the BetMGM might make a move after announcing last month that it expected BetMGM to reach profitability in the second half of 2023 after hundreds of millions of dollars in losses. MGM’s share of the losses from BetMGM, which have come largely from promotions and other player acquisition costs, was nearly ($47.7m) in just Q4 2022.

The speculation increased after Entain said on its most recent earnings call it would stop investing significant capital in BetMGM once it reached profitability. Instead, it looks the companies will maintain their relationship in one of America’s leading digital gaming platforms.

“We value the relationship with Entain, and we value BetMGM,” Hornbuckle said. “But as it comes to the rest of the world, we’re going to move forward with a different proposition.”

Best quote

Bill Hornbuckle: “Without any disparaging comments to our competitors, when you think about the balance of regional locations, domestic locations, Las Vegas, international and digital, we’re the most well-balanced and prepared for growth.”

Best question

By not pursuing Entain, Bank of America analyst Shaun Kelley asked MGM officials what they would do with their available assets. Hornbuckle said the focus would be “relatively small” moves in the near future, specifically around digital gaming, such as new live deal studios and other tech.

Hornbuckle did say during his remarks Wednesday the company remained interested in international iGaming expansion, including in Latin America. Company officials said they were looking at reserving capital for future mergers and acquisitions in the digital space but gave little further clarification.

In its brick-and-mortar divisions, MGM is awaiting final confirmation on what could be a more-than $10bn integrated casino resort project in Japan. Following the completion of deals to sell management rights of the Mirage and acquire the Cosmopolitan in 2022, Hornbuckle said there were no other significant property acquisition moves on the immediate horizon.

Current outlook and trading

MGM officials remained publicly bullish Wednesday after announcing continued growth in its Las Vegas strip and US regional properties since the depths of the COVID-19 pandemic as well as the future return of regular gaming in Asia following the end of the country’s “zero COVID” policies.

Shares of MGM were up roughly 5% in after-hours trading Wednesday following the company’s earnings call. MGM shares are up more than 8.5% in the past month and more than 20% in the past three months.