888 CEO Says Merger with Rank Not on Horizon

It is a go-to cliché in romantic comedy movies and television shows: the male and female leads are the best of friends, each struggling in their searches for true love, and every time it doesn’t work out with a new date, they go running to cry on each other’s shoulder. The entire time, the audience just KNOWS the besties are really soulmates, but it takes until the end of the movie for the characters to figure it out and live happily ever after. A similar theme seems to be playing out with 888 Holdings and The Rank Group, as outsiders wonder why, after failing to acquire William Hill, these two companies don’t just tie the knot with each other.

According to The Telegraph, rumors have been swirling in the internet gambling industry that a possible merger between 888 and Rank is in the works, but 888’s CEO, Itai Frieberger, begged to differ last week.

“888 will continue to grow its business with or without M&A [mergers and acquisitions]” Frieberger told UK news outlets. “Right now the Rank standalone [deal] is not something that we’d like to do.”

Some of those rumors came from words that Rank CEO Henry Birch himself said a couple weeks after the failed bids for William Hill. He at no point came straight out and said that yes, Rank and 888 were going to combine, but he left the possibility open.

“We have shown that we’ve got the confidence and creativity to participate, and the ambition,” he said. “But we won’t do so at all costs.”

When asked about whether Rank and 888 would get together he did not comment, but he added, “I can see myself having lunch with Itai.”

William Hill PokerThe minor corporate drama took place in August, when William Hill declined two advances from a partnership of 888 and Rank. The first offer was made on August 9th, valued at £3.164 billion. In this proposal, 888 and Rank would’ve merged to create a new company called BidCo, which would then, in turn, make the move to acquire William Hill. The proposal had a cash piece of 199 pence per William Hill share plus .725 BidCo shares per William Hill share. When the value of the BidCo shares was determined based on the prices of 888 and Rank stock, the total deal was for 364 pence per share.

William Hill’s Board of Directors rejected that offer, saying:

This conditional proposal substantially undervalues William Hill, is highly opportunistic and does not reflect the inherent value of the business.  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. 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.

About a week later, 888 Holdings and The Rank Group came back with a stronger offer, though apparently not strong enough to satisfy William Hill’s board. The second proposal was also structured differently. The cash portion remained the same, but the BidCo business was trashed. Instead, .860 shares of 888 was offered per William Hill share. This upped the offer from 364 pence per share to 394 pence per share, to a total value of £3.425 billion.

In the second proposal, William Hill shareholders would own 48.8 percent of the combined company (up from 44.6 percent), while 888 shareholders would own 23.8 percent and Rank shareholders would own 27.4 percent.

William Hill’s Board rejected that one, too, reiterating that the offer was “highly opportunistic.”

Under the Revised Proposal, William Hill shareholders continue to be offered a substantial proportion of their consideration in highly leveraged BidCo shares and so it is directly relevant that the Board of William Hill continues to believe that a combination of William Hill with 888 and Rank will not enhance William Hill’s strategic positioning or deliver superior value for shareholders compared against William Hill’s strategy, which is focused on increasing the Group’s diversification by growing its digital and international businesses.

Now, that BidCo comment is not correct, as BidCo was removed from the second offer, but that probably would not change the sentiments of the William Hill Board of Directors.

888’s owner, Eval Shaked, was perturbed after the initial rejection, Tweeting, “Pure ego made #WilliamHill reject #Rank and #888 £3.16bn bid and that will be their downfall.”

In what was perhaps a nod to William Hill’s own failed bid for 888 last year, Shaked added, “#WilliamHill Rejects #888 offer. That’s the last I want to hear about #888 shareholders not willing to go big.”


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