Entain, the owner of Ladbrokes and Neds in Australia, has been busy acquiring local betting operators. However, it might find it harder to strike new deals after an investor slammed the group’s deal-making strategy.
Deals Funded with Undervalued Equity
Eminence Capital, a two per cent shareholder in the London-listed wagering giant, publicly criticized the $14.6-billion company for the way it negotiated deals.
Eminence was particularly dismayed with the $1.1 billion STS Holdings deal. STS Holdings is the biggest betting operator in Poland, but Eminence Capital’s chief investment officer Ricky Sandler thought the deal was funded “with highly undervalued equity” and didn’t create any value for shareholders.
The New York-based investor informed Entain management they had no problems with Entain “pursuing seemingly rational acquisitions.” However, the Polish bookmaker deal, they said, was indicative of an empire-building strategy and was guaranteed to destroy shareholder value.
Sandler went on to say that investors weren’t sure Entain was able “to allocate capital and create long-term value” for shareowners.
Are Australian Deals in Jeopardy?
With several Australian deals on the cards for Entain, these are not the words of encouragement the company wants to hear from its shareholders. The Ladbrokes owner, who acquired the rights for TAB NZ last month, is reportedly interested in buying betr, the bookie in which News Corp invested $49 million.
Industry sources say that the team working on the New Zealand sports betting monopoly deal is also involved in the betr sales process. And that may not be a coincidence.
However, after the letter of dismay from the disgruntled shareholder and the value of Entain’s shares dropping, it is unclear if Entain will pursue that deal or would give up as it did with the Victorian wagering license.
