HBK Europe Contesting Caesars William Hill Takeover
Posted on: March 22, 2021, 09:11h.
Last updated on: March 22, 2021, 11:40h.
Alternative investment firm HBK Europe Management, LLP plans to contest Caesars Entertainment’s (NASDAQ:CZR) proposed $3.69 billion takeover of William Hill (OTC:WIMHY). They will do so on the basis that vital information wasn’t fully disclosed to investors in the British bookmaker.
The Las Vegas-based gaming company made its offer for the sportsbook operator last September, and it was quickly approved by the target’s board. The transaction is slated to close in the second quarter, but HBK will argue against the deal at March 31 UK Scheme Court hearing.
“Our opposition is based upon our strongly held belief that shareholders voting on the Scheme did so without information which would have allowed them to weigh up its true merits,” said HBK in a letter to William Hill shareholders. “In particular, it is our view that the terms of the joint venture agreement entered into between William Hill and Eldorado (now Caesars) dated 6 September 2018 were not adequately disclosed by William Hill.”
The sportsbook operator acknowledges receipt of the letter from the investor, but maintains Caesars’ $3.69 billion all-cash offer “is in the best interests of all shareholders.”
Root of HBK Consternation
The money manager’s qualms with the casino company and sportsbook operator stem from what HBK claims is a lack of transparency regarding a list of potential buyers for William Hill that the US company could deem “restricted.”
“HBK discovered that, in reality, Caesars’ ability to restrict counterbidders is significantly more limited than this,” said the asset manager in the letter. “On 19 November 2020, at the EGM/Court Meeting, William Hill disclosed, after being questioned by HBK at the meeting, that ‘there can be a maximum of six names on this list. Caesars are entitled to substitute one name every six months.’”
HBK specifically mentions Caesars moving to include private equity firm Apollo Global Management (NYSE:APO) on the restricted list. Last September, the Harrah’s operator publicly warned William Hill against accepting a buyout bid from William Hill, noting it could effectively end the bookmaker’s US agreement with Caesars.
Apollo is rumored to be a possible suitor for William Hill’s European assets, which Caesars indicated it will sell when it completes the takeover. However, the private equity company’s willingness to do business with the casino operator remains to be seen.
Caesars Holds Strong Cards
The Flamingo operator has long been in a prime position to acquire William Hill. Eldorado Resorts, the company that acquired “old Caesars,” owns part of the UK-based company and had an agreement with the firm that transferred to any casinos Eldorado purchased.
Still, some market observers argued last year that Caesars’ $3.69 billion bid undervalues William Hill. It’s less than a prior offer old Caesars made for the company, and with some analysts saying the sportsbook operator’s European unit is worth at least $2 billion, there may be something to the thesis.
For its part, HBK believes poison pill provisions were weaponized against William Hill — a rarity in deals involving UK businesses.
“It is a rare occurrence indeed to see a ‘poison-pill’ actually being utilized against a UK company,” said the investor. “As such, UK shareholders, who are unaccustomed to such mechanisms, deserved and required a fuller explanation of the Restricted Acquirers list and its limitations in order to properly assess how to vote.”
HBK is urging William Hill investors to write to the company and the Scheme Court if they believe greater detail on the restricted buyers’ list would have affected their votes.