The deal with William Hill may not be as profitable as it appears

Objects in the mirror may be larger than they appear, and multimillion dollar deals, apparently, may be smaller. That’s how it’s looking anyway for the sale of Australia’s bookmaker to UK sports book giant William Hill recently. What appeared to be a deal that would net Tom Waterhouse – the young owner of – a huge payday, may not be quite as huge as it looks.

Profits Marginal

As a privately-held company (until the sale is finalized), does not have to release any earnings to the public. But The Wall Street Journal estimates that the company pulled in about $12 million in 2012, while some say the business – operational for just three years now – ended last year a good $15 million in debt.  And while business has apparently improved so far this year – to an estimated $28 million – it’s thought to be largely the result of a huge marketing push that one publication, Business Review Weekly, estimates to have cost the young bookmaker from between $20 million to $45 million, which obviously negates much – or any- profit margin. And all that was before Waterhouse had to do some major backpeddling when he received massive criticism for promoting live odds while acting as a sports broadcaster, not to mention the collapse of an anticipated five-year, $50 million gambling alliance with the National Rugby League. Oy.

Where  all this leaves our boy Tom is with maybe – just maybe – a mid six-figures profit, unless some very ambitious $70 million in additional earnings goals are met before 2015, which critics are saying isn’t really that likely.

Share Shuffling

Seems the family business saw a lot of share-shuttling between family members in the past year, including a few switcheroos just the day before the sale to William Hill was announced publicly. According to Business Review Weekly, Tom had a third of the A,B, and C classes of the company’s pre-sale shares in his business, while his aunt Louise – Tom’s dad’s sister (dad was a former bookie) – had the other two-thirds.  But one day prior to the William Hill turnover announcement, Aunt Louise moved her shares over to her dad, who is 91. The plot thickens; but wait, cause there’s more movement here than in a craps game.  Because back in December of 2012, Tom’s dad Robbie, Aunt Louise and baby boy Tom transferred all their D and E class shares to Tom and Grandpa Bill from two companies that the first three owned together. Yikes, we’re exhausted.

So, when all’s said and done, based on the BRW calculations, young Tom is now just a 25 percent stakeholder in the business. After you do all the math – which requires a degree in pre-calculus at minimum – it turns out that young Waterhouse is likely to see, maybe, $5 million in profits from this whacky deal; William Hill is offering $34 million up front of the potential $110 million total deal value, with another $6 million in debt assumption. With the family en masse in for about $20 million, that’s what Tom will have in his actual bank account when the deal officially closes. Before taxes.

Too bad Henry Fielding’s not around for another Tom novel.