Activist investor Ricky Sandler will be appointed to Entain’s board before the end of the year, according to anonymous sources quoted in the Sunday Times.
Sandler’s fund Eminence Capital made waves in the summer when it issued an open letter blasting Entain’s “tone deaf” board and management team.
The letter also argued that multiple attractive paths existed for the operator, including the potential divestiture from its BetMGM joint venture.
However, it slammed the operator’s “illogical” strategy of funding acquisition deals using undervalued company share capital.
“As shareholders lose confidence in Entain’s ability to allocate capital and create long term value, it is quite likely they will support a sale of the company to MGM at a materially lower price than previously assumed,” said the letter.
The Eminence executive’s appointment would come in the wake of the resignation of Entain CEO Jette Nygaard-Andersen, who faced a shareholder revolt from several activist investors.
Reportedly, the activists had been pushing for Sandler to receive a board appointment where he could play a role in selecting candidates for the open seats.
Nygaard-Andersen’s resignation means the board will also have the critical task of selecting a new chief executive officer to lead the group.
Speculation has swirled over who the next CEO will be, with BV group chief Andreas Meinrad, BetMGM CEO Adam Greenblatt and current CCO Dominic Grounsell the current favourites according to odds supplied by novelty provider Star Sports.
Good time for M&A?
Some have argued the current interregnum represents a good opportunity for Entain’s JV partner MGM Resorts to launch another acquisition bid.
MGM’s rising share price, contrasted with Entain’s slump, means that the Las Vegas tentpole is larger in terms of market cap than when it launched its previous bid in 2021.
One wrinkle is that CEO Bill Hornbuckle ruled out the possibility in a February call with investors, stating the company would only be interested in the BetMGM JV, not the wider business.
“The simple answer on Entain is no, we’ve moved on,” he said.
In 2021, Entain rejected an £8.1bn offer arguing that the proposal undervalued the company’s shares.
US sports betting rival DraftKings also reportedly walked back its £16.2bn potential bid after reported disputes about management positions in the combined entity, according to the Financial Times.
Last week’s announcement that Corvex Management had taken a 4.4% stake in the business saw the activist fund hint that an acquisition could be on the cards, arguing that “all options” must be considered to drive shareholder value.
Corvex played a key role in pushing Kindred Group to consider a sale when it invested in the business last year.
Rising Entain share price
Over the weekend, Jefferies opted to boost Entain as a “buy” from a “hold”, leading to a 5.5% jump in share price.
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Overall, Entain has seen its shares rise more than 20% since Nygaard-Andersen resigned earlier in the month as the business continues to reassess its strategy.
Entain also announced today a shake-up in its board appointments following the elevation of non-executive director Stella David to interim CEO.
As a result, former independent non-executive director Pierre Bouchut has stepped up to senior independent director to replace David in that role.
“On behalf of the board, I am delighted that Pierre has agreed to take on the role of senior independent director,” said Entain chair Barry Gibson.
“His extensive board experience and knowledge of the company makes him ideally placed for the role of senior independent director.”
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