MGM Resorts International announced on Wednesday that its $604 million purchase of LeoVegas has been accepted by 96% of the Swedish sportsbook and gaming operator's shareholders.
The final price is marginally less than the original May 2 offer of $607 million, due to exchange rate fluctuations, and will see MGM pay the equivalent of SEK 61.00 ($5.72) per share.
The all-cash transaction comes barely four months after the initial takeover bid, which MGM Resorts characterized at the time as a "unique opportunity for the company to create a scaled global online gaming business."
This overwhelming approval given to the tender offer means that MGM will formally take full control of the Stockholm-headquartered operator by the middle of next week upon final share settlement — and LeoVegas will now be delisted from the Stockholm Stock Exchange.
"The completion of this transaction represents a major milestone for MGM Resorts as we continue to pursue our strategy of growing our online gaming footprint worldwide," said MGM Resorts' CEO & President Bill Hornbuckle in the official press release. "We look forward to welcoming the LeoVegas team and are excited to begin working with them to grow our global digital gaming business and maximize the full potential of our omnichannel strategy."
Svenska synergies
In acquiring LeoVegas, MGM is making what most analysts believe to be an astute deal. The casino owner and legal sports betting operator will be gaining valuable synergies with the addition of the popular European/Nordic book to its current gaming portfolio, which is fronted by its online sportsbook brand — BetMGM — in which it holds a 50% stake (Entain owns the other half).
LeoVegas' substantial overseas customer base not only offers the possibility of creating significant synergies in the future, but is also consistent with MGM's core strategy of establishing global brand awareness.
MGM Resorts has indicated that it will keep LeoVegas' upper management intact, which will jointly oversee the Swedish operators' diverse international platforms, including leovegas.com, slotboss.co.uk, pinkcasino.co.uk, betuk.com, 21.co.uk, and royalpanda.com, the latter of which is branded as Royal Panda Sportsbook in Ontario, Canada.
LeoVegas Group CEO Gustaf Hagman, who has backed the friendly takeover from the outset, believes that his company is a good fit for MGM and its BetMGM betting arm.
"Joining forces with MGM Resorts is a major win for LeoVegas and we're excited to begin working with our new teammates to build upon the work we've done over the last 10 years," said Hagman. "MGM Resorts is a premier gaming entertainment company and we look forward to leveraging their expertise to further our long-term strategic goals."
Never look a cash cow in the mouth
MGM was not simply targeting LeoVegas for its continental chic, however. The Swedish operator, which maintains its main operational offices in Malta, has regularly turned in a profit. LeoVegas generated €394 million ($394 million, now that the U.S. dollar is trading at par with the Euro) in revenue and €46 million ($46 million) in Adjusted EBITDA during the 12-month period ended June 30, 2022.
"From 2017 to 2021, LeoVegas’ revenues compounded annual growth rate was 16%, while maintaining strong profitability,” said MGM in a previous statement. "MGM Resorts’ scale, brands and expertise will allow the combined businesses to expand within existing gaming segments and provide incremental opportunities to enter new areas."
Slow the bleeding
By adding LeoVegas' results to its consolidated balance sheet, MGM will be able to offset some of the hemorrhaging from its loss-making BetMGM subsidiary. That makes LeoVegas an inviting takeover target for MGM Resorts, which must still finance the massive advertising and promotional costs of its BetMGM's expansion into U.S. markets that have gone live in the last few years.
The parent company was obliged to cover $35.5 million in BetMGM losses (Entain stumped up the same amount) in Q2, and MGM estimates its total 2022 liability for its subsidiary will reach $225 million, as BetMGM is not expected to go into profit until sometime in 2023.
