GVC forges US gambling joint venture with MGM Resorts
UK online betting group’s shares rise on deal to expand in US market
Photograph: Ladbrokes/PA Wire
The UK betting group GVC has struck a breakthrough deal with casino group MGM Resorts International to expand in the US in a bid to take advantage of the long-awaited liberalisation of the American gambling market.
The companies are forming a 50:50 joint venture “to create a world-class sports betting and online gaming platform” in the US.
Shares in GVC, the owner of Ladbrokes, jumped as much as 7 per cent at the start of trading before trimming some of those gains to stand 5.02 per cent higher at £11.50 – an all-time high.
The joint venture follows a landmark US Supreme Court decision earlier this year that paved the way for the legalisation of sports betting across the country.
European gambling companies have become global leaders in the sports-betting industry and have been increasing their presence in the US for several years in the hope that the market could open up.
GVC and MGM said they hoped the deal would create “meaningful early mover advantages” ahead of the start of the professional American football season – although regulatory approvals are needed for the deal to go ahead.
GVC would bring its expertise in online sports betting to the deal and MGM its strong presence in the US gaming market.
“It’s two of the superpowers of gaming both sides of the pond getting together,” said GVC chief executive officer Kenny Alexander.
The two partners, which will each contribute $100 million of assets to the joint venture, have previously collaborated in New Jersey, where GVC supplies technology to MGM’s online casino and poker business.
Mr Alexander said the US would become the biggest regulated betting market in the world over the next three to five years.
Progress would depend on how quickly each US state updated regulations covering the industry following the Supreme Court decision.
The deal “de-risked” GVC’s US strategy by providing it with an “ideal partner”, Ivor Jones, an analyst at Peel Hunt, wrote in a research note.
The deal also reduced the chance that the UK company would be forced to spend more money investing across a range of different entry strategies in the US market.
“GVC has signed up for a joint venture with one of the largest gambling businesses in the US on an exclusive basis,” he said in the note. “If the joint venture works, then it will de-risk access to the US sports-betting market for both parties.”
Jim Murren, chief executive of MGM, said the “historic partnership” would be “positioned to become the instant leader in technology, market access, sports relationships and brands”.
The joint venture would have a separate headquarters in the US, overseen by a four-person board of directors comprised equally of representatives of both companies.
Isle of Man-based GVC, which recently completed a £4 billion merger with UK bookmaker Ladbrokes Coral, already has three state licences in the US. It said it had a number of partnership contracts with US casinos, racecourses and gaming venues, in addition to the technology supply deal with MGM.
Rivals, such as William Hill, entered the US market in 2011, acquiring three sports-betting businesses to gain market share in the Nevada sports-betting industry, while Paddy Power Betfair has an online casino in New Jersey, and acquired DRAFT, a US daily fantasy sports site. – Copyright The Financial Times Limited 2018