Corvex Management has become the latest activist shareholder in Entain, joining the growing ranks of investors pushing for a change in corporate strategy.
In a statement released this morning (14 December), Corvex announced it had bought 28 million shares in the Ladbrokes-Coral owner, representing a 4.4% stake.
The purchase comes one day after the resignation of beleaguered chief executive Jette Nygaard-Andersen.
The former media executive had faced growing opposition from activist shareholders for poor operational performance, questionable leadership decisions and a languishing share price.
Corvex said Nygaard-Andersen’s resignation was “a necessary first step”, but that further work would be required to put the business back on track.
“Simply put, Entain’s recent performance has been unacceptable and all options must be considered to drive value,” said the fund.
“We believe Entain is at a critical juncture and can benefit from the constructive engagement of a well-informed shareholder with substantial industry and company-specific experience and expertise.”
The New York-based hedge fund said it would reach out to Entain chairman Barry Gibson and interim CEO Stella David to “be a helpful force for change.”
Last week, the Financial Times was briefed by multiple senior advisers, executives and investors that there was “growing internal discontent” at Nygaard-Andersen’s leadership.
Among other details, sources criticised the chief executive’s habit of taking private jets, revealing that some staff within the finance and audit teams had nicknamed her “Private Jette”.
Corvex was founded in 2010 by Keith A. Meister (pictured), a former protege of billionaire investor Carl Icahn.
Activists circle and demand change
The news of another activist investor taking a substantial stake in the business is likely to represent a headache to senior management.
Corvex would be the fifth such fund to voice its views on the company direction, joining Eminence Capital, Sachem Head Capital Management, Dendur Capital and P Schoenfeld Asset Management.
According to the FT, activists are pushing for Eminence Capital’s Ricky Sadler to be appointed to the board and given a role in choosing the currently vacant appointments.
However, there are reported disagreements between the activists about who should take seats on the board.
Eminence blew the whistle on Entain’s leadership in the summer after releasing an open letter that blasted management’s M&A strategy, in particular its “illogical” funding of deals using undervalued shareholder equity.
This was followed by Sachem Head Capital Management and Dendur Capital in November, who reportedly took umbrage with stagnant performance in core markets, as well as M&A strategy and a series of costly management mistakes.
During Nygaard-Andersen’s tenure, the business spent more than £2bn on 11 bolt-on acquisitions, many of which delivered questionable returns.
For example, Entain spent £50m on esports betting company Unikrn in 2021, only to close it down as a B2C brand this year.
The most important question ahead for both activists and management will be who the company appoints as its next chief executive.
Corvex and Kindred
Corvex itself has a previous relationship with the industry. The activist investor played an important role in pushing for a change in leadership and strategic direction at Kindred Group.
After taking a more than 10% stake in the Unibet-operator in May 2022, the fund immediately pushed for it to explore “strategic alternatives” including the possibility of a sale or business combination.
In August, the fund increased its share to 15%, becoming the business’s largest shareholder, and began lobbying for a seat on the board.
This year, Kindred founder Anders Ström gave an explosive interview to Swedish business publication Dagens Industri, where he criticised Kindred management for its strategic outlook, including indifference at the prospect of a sale.
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