Corvex Management acquires 4.4% share in Entain

Entain has been under a lot of pressure lately. The company has just completed an HMRC settlement, which will see the British gambling giant pay £600m in both settlement costs, as well as charity contributions, and also covering legal expenses.

Jette Nygaard-Andersen, the now-former Chief Executive, stepped down last week, passing the reins onto Stella David, who will serve as interim CEO moving forward, while the company hunts for a new chief executive.

To add insult to injury, Entain’s Australian subsidiary has been named in a new regulatory reprimand issued by ACMA, the Australian Communications and Media Authority. This has not stopped Corvex Management, a hedge fund, from moving in on the embattled giant and acquiring a 4.4% stake in the company.

The news was confirmed on Friday, December 14, with Corvex saying that it had acquired 28 million shares in the Ladbrokes-Coral parent company, further lending credence to the rumours that Nygaard-Andersen had been facing a lot of flak from activist investors within the company.

In a statement confirming the purchase of the shares, Corvex said that Entain’s most recent performance had been unacceptable, arguing that all options must be considered to guarantee better value. The statement further read:

"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."

Although Entain has been able to grow under Nygaard-Andersen’s stewardship, and the company’s most recent settlement with the HRMC was mostly a success, and something that was bequeathed onto the company from its previous brand identity, the dissatisfaction with the former CEO’s management style had apparently been growing.

According to the Financial Times, which originally reported about the internal unrest against the CEO, Nygaard-Andersen had been in the habit of overspending on certain things, such as private jets, which is not uncustomary for a FTSE100 chief executive, nor the root of the issue why a company may not be doing so well financially.

Yet, sources have said that some company members had humorously dubbed their boss "Private Jette."

Yet, not all opposition against management had been hearsay or rumors. Some have spoken quite openly, including Eminence Capital, Sachem Head Capital Management, P Schoenfeld Asset Management, Dendur Capital, and now Corvex. One of the biggest issues that was cited by most of these funds was the funding of acquisition deals that according to them did not make much financial sense.

One that comes to mind is Unikrn, which was bought out for £50m and for a moment there really signaled that esports could become a much more established driver of revenue for the company. Unikrn, though, had to be shut down, at least as a business-to-customer brand, with its tech stack still mothballed somewhere in the company’s stocking cabinets.

Corvex is similarly involved with Kindred Group, which the fund has also been pushing to consider similar "value-focused" courses. Meanwhile, 888 Holdings, another company in financial unrest, is also grappling with its most recent performance.

It seems a lot of big gambling companies are right now rethinking their strategies – whether forced by external factors or from a prescient self-preservation instinct from within.

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