Caesars, William Hill Discussing Combining iGaming, Sports Betting Units

Posted on: September 1, 2020, 09:44h. 

Last updated on: September 1, 2020, 12:17h.

Caesars Entertainment (NASDAQ:CZR) is reportedly already holding talks about another merger after a recent acquisition that created the largest domestic gaming company by number of properties. This time, the company wants to combine its online casinos and sports wagering operations with the US business of William Hill (OTC:WIMHY).

Caesars, William Hill In Talks
The William Hill sportsbook at the Plaza Las Vegas. Talks between the book operator and Caesars about an online gaming merger are gaining steam. (Image: Wall Street Journal)

Wolfe Research analyst Jared Shojaian floated the idea of Caesars and William Hill forming a 50/50 joint venture for the former’s iGaming and sports wagering segment, whereby each company would own 40 percent and the remaining 20 percent would be sold to public investors.

In an interview with Bloomberg, William Hill CEO Joe Asher confirms his company is in discussions with Caesars about marrying their internet casinos and sports wagering businesses. But he disclosed few details.

There’s a lot of opportunity in there, and we think that we’ve got some really powerful assets in this space, so obviously it’s an ongoing subject of discussion,” Asher told the news agency.

Under the terms of a pact formed two years with the company then known as Eldorado Resorts, the British bookmaker runs the gaming company’s sportsbooks, with the casino giant receiving 40 percent of the economics from that arrangement and a 20 percent stake in William Hill’s US unit.

Deal-Making Galore

Eldorado is just a few weeks removed from finalizing its $17.3 billion takeover of Caesars, a deal in which the buyer took the target’s name. Last week, William Hill completed its purchase of CG Technology’s (CGT) Nevada operations.

With that acquisition, the sportsbook operator adds books at the Cosmopolitan, Palms, Tropicana, and Venetian, among other well-known Las Vegas venues, significantly boosting its presence in Sin City in the process. Through Eldorado’s purchase of Caesars, William Hill gained access to the famed Caesars Palace sportsbook.

Because of the Caesars takeover, William Hill’s ex-Las Vegas footprint is growing, too, as it takes on operations of sportsbooks at a slew of Caesars regional properties, and in Atlantic City, NJ. That brings its US portfolio to 170 books in 13 states, according to Bloomberg.

The new version of the Flamingo and Harrah’s operator has casinos in eight states where sports wagering is live and legal, and in several more, including Louisiana, that could join the legal fray as soon as later this year.

Unlocking Value

Last month, Caesars CEO Tom Reeg said a “permanent solution” for the company’s iGaming and sports wagering business could be revealed by the end of this year.

Combine that time line with expectations that the segment could drive $600 million to $700 million in revenue next year, and it’s easy to see why talks with William Hill are gaining momentum. Caesars’ internet casinos/sports betting unit and William Hill’s US operations share at least two important traits: avenues for major growth and, in the eyes of some analysts, lack of appreciation in the investment community.

Marrying the two enterprises and selling a stake to the public could be the ideal avenue of creating shareholder value for units that markets aren’t appropriately valuing.

With valuations on online gaming and sports wagering companies soaring, the time is ideal to consider value-unlocking transactions. Shojaian, the Wolfe Research analyst, says that based on Caesars’ aforementioned $600 million to $700 million online gaming/sports betting revenue forecast for 2021, a combination and then spin-off with William Hill would be worth approximately $7 billion.