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Corvex calls for further changes at Entain after taking 4.4% stake

| By Robert Fletcher
Activist hedge fund Corvex Management has called for further changes at Entain after acquiring a 4.4% stake in the gambling giant.
Corvex Entain

US-based Corvex has purchased approximately 28 million shares of Entain. This came as news broke this week that Jette Nygaard-Andersen had resigned from her role as CEO of Entain.

Corvex said the management change was a “necessary” first step for Entain. However, it said more changes are required after what it described as an “unacceptable” recent performance by the group.

“We believe Entain is at a critical juncture and can benefit from the constructive engagement of a well-informed shareholder with substantial industry and company-specific experience and expertise,” Corvex said.

“While the company’s recent management change was a necessary first step, further change is required. Simply put, Entain’s recent performance has been unacceptable and all options must be considered to drive value.

“We intend to immediately engage with chairman Barry Gibson and interim CEO Stella David to be a helpful force for change.”

Change at the top for Entain

Entain announced Nygaard-Andersen’s resignation on Wednesday (13 December). David took on the interim role with immediate effect, with Entain now searching for a permanent replacement. 

Nygaard-Andersen had led Entain as CEO since January 2021, having previously served as a non-executive director. She joined the business from Modern Times Group, replacing Shay Segev after he left to join sports streaming platform Dazn.

David is currently a non-executive director at Entain. Chairman Gibson described David as an “intensely commercial leader”, adding that he is confident she will help to set the group on the path to achieving strategic aims.

Troubles remain despite settling Turkish case

Nygaard-Andersen’s departure came in the wake of Entain resolving a long-running case with the Crown Prosecution Service (CPS). Entain reached a final deferred prosecution agreement (DPA) with the CPS over historic activities in Turkey.

The DPA states Entain will pay a financial penalty and disgorgement of profits to a total of £585.5m. The business will also make a £20m charitable donation and contribute £10m to HMRC and CPS costs.

These will be paid in instalments and will run for a period of four years. The commencement date will follow from the final court approval.

However, Entain’s future remains uncertain due to wider concerns about the group. This month, investment bank and financial services giant Goldman Sachs downgraded Entain to sell from buy.

Goldman Sachs took this step amid concerns over business growth, particularly within the Entain online division. Goldman Sachs forecast Entain’s pro-forma online growth to be negative in Q4 of 2023 and H1 of 2024. Entain is also not expected to return to growth until the second half of next year.

In addition, Goldman Sachs cut earnings per share estimates for 2024 and 2025. This is now expected to be approximately 30% lower than previously stated, while free cash flow has also deteriorated.

Ups and downs of 2023

While Entain reported a record H1 2023, its Q3 update showed online net gaming revenue growth had slowed to single figures.

Also in its Q3 update, Entain said BetMGM – its joint venture with MGM Resorts – held an 18% market share in US states. This was level with Q2 and only slightly ahead of 17% during the first quarter. 

BetMGM also recently expanded into the UK – but without Entain. Instead, MGM is working with LeoVegas, utilising LeoVegas’ technology and platform. MGM Resorts acquired the LeoVegas business last year for $604m.

Not long after this, Gibson and Nygaard-Andersen significantly increased their shareholdings. The chair’s spouse, Brenda Gibson, also increased her holding in Entain from 41,902 shares to 57,434. Chair Gibson has since purchased more shares in the group.

Lasting concerns over Nygaard-Andersen

Prior to stepping down, Nygaard-Andersen faced criticism for her leadership, both from within Entain and the wider industry.

A recent report in the Financial Times suggested contention within the group. Criticism from previous and current executives and investors focused on Nygaard-Andersen struggling with slow revenue growth. This was coupled with ever-increasing regulatory obligations.

In her final few months as CEO, Nygaard-Andersen also oversaw a series of major M&A deals. These included Polish sportsbook operator STS Holding, which closed in August.

In October, Entain also finalised its acquisition of Angstrom Sports. Nygaard-Andersen was decisive on how the deal would benefit BetMGM – its sports betting joint venture with MGM Resorts – in the US.

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