William Hill Rejects £3.6 Billion 888 and Rank Acquisition Bid
Posted on: August 9, 2016, 02:45h.
Last updated on: August 9, 2016, 03:17h.
Bookmaker William Hill has reportedly rejected a joint takeover bid by 888 Holdings and the Rank Group that would value the company at £3.6 billion ($4.7 billion).
Two weeks ago, news broke that 888 and Rank had formed a consortium, with an eye to engineering a reverse takeover of Britain’s biggest bookmaker. The expected bid came this morning, and William Hill immediately convened an emergency board meeting to consider the proposal.
888 and Rank said that they saw “significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies, and from the anticipated benefits of economies of scale which will accrue to all shareholders.”
The offer of 364p a share is made up of 199p in cash and 0.725 percent per share in the new company. The consortium said it believed synergies and cost savings created by the proposal would push the company’s value up to 408p per share, hence the £3.6 billion figure. The proposal would involve 888 taking over Rank, with the newly formed company then acquiring William Hill.
But early reports coming from London suggest that the proposal has been rejected by William Hill’s board of directors on the grounds that it is too low and too risky, and would create too much debt: some £2.2 billion ($2.9 billion).
In a statement released early Tuesday, William Hill’s chairman Gareth Davis called the bid “highly opportunistic,” a reference to the fact that the bookmakers had been left in a vulnerable position by the ousting by the board of its CEO James Henderson, apparently as a result of his failure to turn around the company’s online operations.
“It is a very complex three-way combination at a low premium involving substantial risk for William Hill shareholders: execution risk, integration risk and risks of materially increased leverage,” said Davis. “The Group has a strong team to deliver against our strategy to grow our digital and international businesses so we strongly advise that shareholders take no action.”
The offer did not represent the “inherent value” of the business, Davis added.
The underperformance of William Hill’s digital arm is one reason why the company might have been interested in merging with 888. It had, after all, attempted to acquire the online gambling giant itself in early 2015. But Rank, whose specialty is land-based casinos and bingo halls, would not seem to be a natural fit for that end goal.
The UK gambling industry has undergone a spate of consolidation over the past year, as companies seek to achieve cost savings and scale in the face of greater taxes and tighter regulation across Europe.