William Hill In £2.9 Billion Takeover Battle With Caesars and Apollo
For decades, William Hill has been seen as the outlier in terms of betting companies because it wasn’t owned by a larger corporation. With the likes of Coral and Ladbrokes first merging and then having been taken into the wider network of GVC Holdings, it seemed as though the British bookmaker would be the last one standing in terms of not merging with a large-scale rival.
Now it looks as though that could all change, with Caesars Entertainment in advanced talks to takeover to world-famous bookie. The firm, based in the United States of America and most famous for the Las Vegas casino Caesars Palace, has offered 272 pence a share in a deal believed to be worth about £2.9 billion. Another company called Apollo, a private equity firm, has also approach William Hill about a takeover.
Why Companies Are Suddenly Interested In William Hill
With two different companies approaching William Hill about a takeover in the same period of time, the obvious question to ask is ‘why now’. The answer lies, at least partially, in the development of the firm since the Supreme Court in the United States reached a decision that legalised betting on the likes of American football, baseball and basketball in the country. It was a removal of the 1992 Professional and Amateur Sports Protection Act.
It’s also slightly to do with the fact that recent lockdowns around the world have seen betting move from the high street to online portals, with William Hill focussing there to such an extent that 119 of their betting shops will not re-open once the current crisis is over with. There are still around 1,500 William Hill stores in the United Kingdom, though the company’s high street presence had been receding even before the pandemic.
Whilst that’s what’s been happening in the UK, the company’s strategic position in the United States of America has been heading in the right direction for a number of years. William Hill already boasts 170 retail sites across 13 states, whilst also working hard to establish itself as a trusted and recognised brand for online betting. It makes complete sense, therefore, for companies to want to benefit from that.
The Companies In The Bidding War
It now seems as though there will be something of a bidding war for William Hill, with Caesars Entertainment and Apollo both looking to takeover the bookmaker. Apollo is a private equity firm that is based in the United States and has recently been in the news in the UK following a move to buy the Asda supermarket brand from Walmart in a move expected to be worth about £6.5 billion.
Caesars Entertainment, meanwhile, is a company that can trace its history back to the founding of Las Vegas. Founded as Harrah’s Entertainment in 1990, that side of the business has its origins in the creation of a bingo parlour in Reno in 1937. The company re-branded as Caesars Entertainment Corporation and was bought by Eldorado Resorts in 2020, changing its name to Caesars Entertainment.
Caesars The Likely Winner
Caesars Entertainment already owns a 20% stake in the US operations of William Hill, putting the company in pole position during any takeover battle. Indeed, the US firm has essentially said to William Hill that the joint-venture between the two companies would be in jeopardy if the bookmaker chose Apollo over them. William Hill have exclusive rights to offer their sports betting under the brand of Caesars.
David Cumming, who is the Chief Investment Officer for Equities at Aviva Investors, said that the ‘synergies’ between Caesars and William Hill would almost certainly see the Caesars Palace owner come out on top of any takeover battle. He also thinks that the final offer will come in even higher than the current one, thanks in no small part to William Hill’s share price jumping as a result of the takeover rumours.
What’s Being Said About The Takeover
The Chief Executive of Caesars Entertainment, Tom Reeg, declared it to be an ‘exciting prospect’ that the company might be able to combine the land-based casinos with sports betting and online gaming in the United States. He said, “William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast growing US sports betting and online market.”
In relation to William Hill’s share prize going up by 42% in order to reach 312 pence per share on Friday, David Cumming said:
“The view is – and we do hold some William Hill so it [has] some interest here – the 40% rise on Friday, given comparative valuations in the US, it is possible that the bid comes in at a higher level than the closing price we saw then so there still might be some upside.”
‘Minded To Recommend’ The Offer
Caesars Entertainment, which is already a powerhouse in the United States of America thanks to its hotel and entertainment enterprises, said that the William Hill board had indicated to them that ‘the possible cash offer is at a price level that they would be minded to recommend to William Hill shareholders’. As things currently stand, though, no official offer has actually been made.
Should a firm offer be forthcoming then it will almost certainly be accepted by William Hill. It will then come down to whether the anti-competition authorities give the deal the go-ahead. If they were to do so then it’s likely that the takeover would be completed in the second half of 2021. It makes sense for William Hill to accept the offer, given the company made pre-tax losses in both 2018 and 2019.
The losses were thought to be due to the moved from the government to introduced a maximum stake on Fixed Odds Betting Terminals. That the bookmaker also needed to close all of its physical shops during the recent health crisis won’t have helped aid its recovery. A cash offer to buy the firm is therefore seen as something that will be difficult for shareholders to turn down.
