William Hill, Amaya End Merger Talks

William Hill and Amaya have been two of the gambling names that we have heard of the most in the last couple years on the mergers and acquisitions front. This month, they confirmed that they were in discussions to merge, but on Tuesday, they both announced that those discussions have ended and they will go their separate ways.

The “merger of equals” seemed to make some sense on its surface, as Amaya owns PokerStars and is thus the world’s biggest player in the online poker space (not to mention a solid and growing live tournament business), while William Hill is the UK’s largest bookmaker and has a significant online presence in both sports betting and casino games. Coming together would create a very nice portfolio.

amayaBut it appears things started falling apart last week as William Hill’s largest shareholder, Parvus Asset Management (a hedge fund which owns 14.3 percent of the company) expressed its distaste for the possible deal. Mads Eg Gensmann and Edoardo Mercadante, the co-founders of Parvus, went to William Hill chairman Gareth Davis and interim chief executive Philip Bowcock to argue against the £4.6 billion merger, calling it a “complex, cross-border” deal that wouldn’t do much for the company except increase its debt. According to several reports, Davis and Bowcock were still very eager to complete the deal and essentially waved off the concerns from the Parvus executives.

Thus, Eg Gensmann and Edoardo Mercadante appealed to the William Hill Board of Directors, penning a letter urging them to reject a possible Will Hill/Amaya merger.

“We strongly encourage that the board and management stops wasting valuable time and shareholder resources pursuing this value-destroying deal,” they wrote. “Instead, the board and management must focus on maximising value for William Hill owners, rather than Amaya shareholders, by considering all alternative options available, including a sale of William Hill.”

Simon Jessop of Reuters elaborated:

On the proposed deal with Amaya, Parvus said the Canadian firm’s core business of online poker was the least-attractive segment within online gambling and a tie-up would weaken William Hill’s strategic position in the long run.

Parvus also said the potential deal’s financial structure favored Amaya shareholders at the expense of William Hill’s, despite the latter’s far superior cash-flow generation.

Former William Hill CEO Ralph Topping backed the view of the Parvus execs, telling The Financial Times, “I fully support what Parvus are doing, because they are good people. When this deal was announced I was left scratching my head. Both [Amaya and William Hill] have a lot to sort out in their own business. I’m very anxious on the future of William Hill.”

On Tuesday, both William Hill and Amaya formally announced that any talks of a combination were over. William Hill alluded to the Parvus execs in its statement (though those reading it without having read articles such as this one would not catch the reference), saying, “After canvassing views from a number of William Hill’s major shareholders, the Board has decided that it will not pursue discussions with Amaya. Accordingly, the Board has informed Amaya that it is withdrawing from discussions and wishes Amaya well for the future.”

In Amaya’s press release, company Chairman Divyesh Gadhia implied that it was Amaya that nixed the deal, rather than William Hill, saying, “Amaya is a strong and growing company with experienced management and a proven strategy to deliver profitable growth and shareholder value. Together with our financial advisors, we evaluated a wide range of strategic alternatives to maximize shareholder value and have concluded that remaining an independent company is in the best interest of Amaya’s shareholders at this time. The Board has full faith in Amaya’s management to execute on its strategy and objectives.”

William Hill has been busy discussing buyouts and mergers in the last few months. In August, it was approached by The Rank Group and 888 Holdings with two potential buyout offers. In the first, 888 and Rank would have combined to form a company called BidCo, which would have paid 199 pence per William Hill share plus .725 shares of BidCo per William Hill share. The value of the deal was estimated at 364 pence per share or £3.164 billion in total.

After William Hill rejected that, Rank and 888 ditched the BidCo portion and proposed 199 pence per William Hill again plus .860 888 shares per William Hill share. This proposal was worth 394 pence per share, upping the total value to £3.425 billion.

William Hill turned down that offer, as well, and 888 and Rank eventually gave up the chase.

In early 2016, William Hill had actually attempted to buy 888 Holdings for £700 million.


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