Under its current proposal, DraftKings plans to offer 28 pounds per Entain share, representing a premium of 46.2% to the UK firm's Monday close. Entain said it had earlier rejected a proposal from DraftKings to buy the company for 25 pounds ($34.15) per share.
Entain's shares closed up 18% as the companies confirmed the approach, which would give the U.S. firm access to the Ladbrokes Poker and bwin online betting brands. Shares of DraftKings were down 0.6% in extended trading after closing 7.4% lower at $52.77.
DraftKings' takeover proposal comes after Entain had rejected an $11 billion offer from U.S.-based MGM Resorts International in January, saying it undervalued the company, but analysts expect MGM to return with a new bid as it has since accumulated more cash.
Entain and MGM already have a joint venture called BetMGM, an online sportsbook for betting on NFL and NBA games that controls about 21% of the market versus DraftKings' 17%, according to RBC Capital Markets.
Any deal in which Entain would own a competing business in the United States would require MGM's consent, MGM said on Tuesday in response to DraftKings' approach.
The deal frenzy in the online gambling space comes at a time when regional operators are looking to expand and capture opportunities in states across the United States opening up to sports betting.
In a transatlantic deal, Caesars Entertainment acquired Britain's William Hill, a traditional rival to Entain's Ladbrokes brand, in a 2.9 billion pound transaction earlier this year. Caesars is selling the non-U.S. assets of William Hill.
Demand for online betting boomed during the pandemic as customers took to playing from home when casinos and betting shops were off-limits.
DraftKings, which allows users to enter daily and weekly fantasy sports-related contests, confirmed it had approached Entain but did not provide any additional details. It bought rival Golden Nugget Online Gaming Inc in a $1.56 billion all-stock deal last month.
Entain said DraftKings had until Oct. 19 to make a firm offer for the company.
($1 = 0.7322 pounds)
(Reporting by Subrat Patnaik and Nivedita Balu in Bengaluru, Krystal Hu in New York; Additional reporting by Yadarisa Shabong and Chavi Mehta; Editing by Ramakrishnan M., Sriraj Kalluvila, Steve Orlofsky and Anil D'Silva)
By Subrat Patnaik and Nivedita Balu