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William Hill is already equity partners in a U.S. venture with Caesars, running sports betting operations online and at Caesars locations. (Bryan Steffy/Getty Images for William Hill U.S.)
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Caesars Entertainment
has agreed a £2.9 billion ($3.7 billion) deal to buy British gambling company
William Hill.
The London-listed company said its board intends to recommend “unanimously and unconditionally” that shareholders vote in favour of
Caesars’
takeover bid. William Hill shares were largely unmoved but Caesars stock climbed 2.4% in pre-market trading.
The U.S. hotel and casino operator’s offer, which would solidify its position in the burgeoning U.S. sports betting market, has seemingly won out over buyout group
Apollo Management.
The back story. On Monday, Caesars confirmed it was in talks with FTSE 250-listed William Hill over a £2.9 billion cash offer. It also revealed that it would terminate its lucrative partnership with the bookmaker if Apollo’s rival offer was accepted. William Hill confirmed last Friday that it was in takeover talks with Caesars and Apollo, sending its stock rocketing up 43% in London trading. The shares fell 11.6% on Monday on news of Caesar’s bid.
William Hill currently owns 80% of a U.S. joint venture with Caesars, running sports betting operations online and at Caesars’ locations. Earlier this month, media giant ESPN signed co-exclusive deals with Caesars and
DraftKings,
which made William Hill ESPN’s official odds supplier across its platforms.
The British bookmaker has emerged as a market leader in the U.S. sports betting market since a 2018 Supreme Court paved the way for states to legalize the practice. As it expands into America and boosts its online operations, William Hill is transforming its British business. In August the company announced that 119 of its shops closed due to coronavirus would not reopen, and regulatory woes including £2 stake limits on certain betting terminals have hit performance at physical locations.
What’s new. William Hill and Caesars announced Wednesday that they had reached an agreement under which Caesars’ British subsidiary would acquire William Hill in a cash deal. The £2.9 billion offer—272p per share—represents an 81% premium to the volume-weighted average price of William Hill stock for the three months to Sept. 24.
The offer must be approved by at least 75% of William Hill shareholders, who will vote at meetings expected to be scheduled in December.
Caesars said it intends to finance the deal with an equity capital raise of 30 million shares, alongside existing cash and $2 billion in new debt.
Roger Devlin, William Hill’s chairman, said that this is “the best option for William Hill at an attractive price for shareholders.” He noted that the bid recognizes “the risk and significant investment required to maximise the U.S. opportunity given intense competition in the U.S. and the potential for regulatory disruption in the U.K. and Europe.”
Looking ahead. Analyst chatter that the company is undervalued at $3.7 billion is based on the future value of the U.S. sports betting market. However, that future value is somewhat uncertain and Caesars’ bid prices in that risk. It is also unclear whether William Hill could find a better buyer than its U.S. partner. Caesars’ experience in the gambling meccas of Nevada make it well-suited to take over William Hill, and it also holds the power to terminate their attractive partnership.
Another question is what this means for the U.K. operations of a storied bookie predating the legality of sports betting in Britain. Caesars said it intends to “seek suitable partners or owners” for non-U.S. operations, but it could struggle to find a buyer. The British industry is in a state of caution as the government signals it will pursue gambling reforms, and other bookies are looking to America for growth right now. On Wednesday, rival
888
forecast that annual profit would beat expectations—but it was its U.S. business that drove revenue growth.
