US casino operator Caesars reaches deal to buy William Hill
Purchase of the UK betting group would strengthen Caesars' ability to expand in lucrative business of online gaming in the US
London — UK betting group William Hill has chosen to sell itself to a rival rather than private equity, yet the £2.9bn deal could still end up in a break-up of the company.
US casino operator Caesars Entertainment’s takeover bid was accepted by William Hill’s board, according to a statement on Wednesday, strengthening its position to expand in the lucrative business of online gaming in the US.
If its bid is successful, Caesars said its focus would be on London-based William Hill’s US assets and it would “seek suitable partners or owners” for the other businesses, such as the UK. The British company has been focused on its US operations after the supreme court legalised sports betting in 2018, while its older markets have suffered from tighter regulation.
Wednesday’s statement looks to have shut out a rival bid from buyout firm Apollo Global Management. From William Hill’s perspective, a deal with Caesars may have been all but inevitable: the companies already operate a joint venture in the US, and Caesars said on Monday it could terminate aspects of it if Apollo’s approach prevailed.
Caesars said the joint venture “needs to be broadened in scope to fully maximise the opportunity in the sports betting and gaming sector”. It estimates the US sports and online betting market could be worth as much as $35bn.
Analysts from Truist estimated William Hill’s non-US assets could fetch between $2bn and $4.5bn. Caesars would put that money towards repaying its debt financing, it said in a rights issue prospectus on Monday.
“It looks like a logical and natural move of consolidation of this round of US brick-and-mortar players acquiring online knowledge,” Itai Pazner, CEO of online gambling company 888 Holdings, said in an interview on Wednesday. “I see a lot of opportunities in terms of M&A, either bolt-on M&A as we have been doing for the last few years, or something more strategic.”
One example of this trend is Flutter Entertainment’s purchase of the Stars Group, which it completed in May.
Though William Hill benefited from its US presence, it’s been caught by changing rules in its home market. Founded in 1934, its betting shops became ubiquitous around Britain, but hundreds were rendered unprofitable by a 2018 UK government crackdown on the stakes companies could charge on betting terminals.
Gambling advertising has also been curtailed — some voluntarily by operators — while taxes on online betting have risen. Cancelled sporting events and lockdowns due to the pandemic have accelerated store closures.
Caesars’s cash offer of 272p per William Hill share needs the approval of 75% of the British bookmaker’s shareholders, according to the statement. It’s a 25% premium to William Hill’s closing share price before takeover interest was reported by Bloomberg on Friday.
Caesars shares rose 5.2% to trade at $57.32 in New York, while William Hill shares erased earlier losses and gained 0.8% to trade at 276.5p.
“William Hill is worth significantly more than the 272p Caesars bid,” Jefferies analyst James Wheatcroft said in a research note. “But with the recently revealed poison pill structure of the JV and now a WMH board recommendation, Caesars Entertainment is well-placed to realise the full upside.”
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