Analysts have flagged U.K. gambling companies as a good way to ride the spread of sports betting in the U.S. — and they’re feeling vindicated after Monday’s big deal in this realm.
Casino operator MGM Resorts International MGM, -1.60% and U.K. gambling company GVC Holdings PLC GVC, +4.75% announced they’re creating a U.S. sports betting and online gaming joint venture. It’s a bid to take advantage of the opportunities opened up by the Supreme Court’s May ruling on sports betting — and it comes just before football season, with the NFL’s preseason Hall of Fame Game between the Chicago Bears and Baltimore Ravens scheduled for Thursday.
“This looks like the most comprehensive and solid deal we have seen so far relating to U.S. sports betting,” said Berenberg analyst Roberta Ciaccia in a note.
“We consider this to be a strong positive catalyst for GVC,” wrote Ciaccia, adding that her bank is backing its buy rating for the British stock, which was jumping by 5% on Monday to a record high. She said in May that GVC’s sizable rally during that month on the Supreme Court ruling hadn’t priced in all of the potential upside from the decision, and that British rival William Hill WMH, +0.13% looked due for more gains, too.
This is clearly the ‘big and bold’ deal that GVC had intimated,” Ciaccia also said on Monday, referring to GVC CEO Kenneth Alexander’s May promise that his company would take an aggressive approach to the American market.
A 50/50 joint venture ought to “enable GVC to benefit from a much larger profit pool in the future, and any initial operating losses would likely be compensated for by future market-share gains,” the Berenberg analyst wrote. Other pluses include “the power of the MGM brand,” and the American company’s customer base of about 27 million.
Other analysts praising the deal included a team from British brokerage Peel Hunt, which has a buy rating on GVC.
“Once again GVC shows its ambition and ability to get deals done,” said Peel Hunt’s Ivor Jones and Douglas Jack in a note. “From a GVC point of view, we believe it reduces the risk that it will invest heavily in multiple market-entry strategies and, on that basis, we regard it is as a positive.”
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