FTSE starts 2021 with a bang, Entain rebuffs blockbuster bid from MGM

“The FTSE 100 started 2021 with a bang. Surging more than 2% higher and closing on the 6,700 mark amid M&A news and confirmation that roll-out of the AstraZeneca coronavirus vaccine will commence today,” says AJ Bell Investment Director Russ Mould.

“MGM’s blockbuster bid for gambling group Entain and plumbing firm Ferguson’s sale of its UK business play second fiddle to the vaccine news which is an even more important focus for the markets given the more severe restrictions necessitated by a more infectious strain of covid.

“For now investors clearly believe the vaccine will provide the catalyst for a big recovery, perhaps after a tough first quarter, but getting enough of the population inoculated will be a big logistical challenge.

“A key determining factor could be whether the existing vaccines prevent transmission of covid or just infection – this could determine how quickly we return to normality and how patient the market might be.

“Amid a widespread rally across asset classes, the oil and gold price both pushed higher, though the appetite for alternatives is reflected in bitcoin which pushed to a new record above $34,000 having taken out the $20,000 and $30,000 levels in a matter of weeks.”

Entain

“A matter of weeks after dusting off a shiny new name and strategy and Entain (formerly GVC Holdings) could be coming to an end to its journey on the stock market with MGM Resorts making a multi-billion dollar offer.

“This follows the recent approval of a takeover of William Hill by Caesars Entertainment and the similarities are striking. Both involve US partners who each company would have seen as their route to substantial growth across the Atlantic.

“While Entain has rebuffed the offer as undervaluing the company and questioned the case for a tie-up, like William Hill its bargaining position is somewhat compromised by the fact it is negotiating with a partner.

“Shareholders may be persuaded to hold firm by the fact the offer includes only a limited cash element.

“The US was seen as a great opportunity for UK firms after a big obstacle to sports betting was removed by a court ruling in 2018.

“However, the ultimate result could be that UK gambling firms are swallowed up by US firms like MGM and Caesars which are desperate to add to their online footprint at a time when the pandemic is undermining business in their resorts and casinos.”

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