William Hill Turns Down Another 888/Rank Offer
Less than a week after rejecting an acquisition offer from a Consortium composed of 888 Holdings and The Rank Group, William Hill has turned down a second, more lucrative bid from the pair of gaming firms. On Monday, both sides issued press releases to detail this second round in the courtship.
In the Consortium’s original offer, 888 and Rank would merge to form a new company called BidCo, which would then acquire William Hill. The proposal was for 199 pence per William Hill outstanding share plus .725 BidCo shares per William Hill share. Based on the share prices of both 888 and Rank on the last day of trading (August 5th) before the offer was made, the combined cash and stock price was valued at 364 pence per share of William Hill.
With 869.289 million William Hill shares outstanding, last week’s buyout offer was for £3.164 billion.
Monday’s revised proposal keeps the cash offer per share the same, but changes the stock portion of the offer. Gone is the BidCo business. Instead, .860 shares of 888 Holdings are being offered for each share of William Hill. Based on the August 5th closing price of 888, the increased proposal is for 394 pence per William Hill share, a boost of 30 pence per share.
The overall value of the proposal is £3.425 billion.
Additionally, the new proposal would give William Hill 48.8 ownership of the new company, compared to 44.6 percent in last week’s proposal. 888 shareholders would own 23.8 percent and Rank shareholders would own 27.4 percent. In this scenario, Rank shareholders would receive 1.086 new shares of 888 for each share of Rank.
888 and Rank say they “have identified savings of at least £100 million” per year which “would represent an implied capitalised value of £940 million” based on an EV / EBITDA multiple of 9.6x.
In the new proposal, 888 and Rank cite the following benefits:
• the scale benefits of being the UK’s largest multi-channel gambling operator, with a complementary combination of retail and digital brands and proprietary technology, content and products across sports betting, casino, poker and bingo;
• an enhanced growth strategy to develop the business into new markets and regions, unlocking cost savings and efficiencies across online and land-based platforms, and diversification providing mitigation against adverse regulatory change;
• leveraging the Enlarged Group’s marketing spend which would be in excess of £300 million;
• substantial revenue synergies arising from cross-selling, rebranding and customer experience optimisation, with near-term opportunities arising from the ability to cross sell 888 and William Hill content to Rank’s approximately 3 million Grosvenor Casinos, Mecca Bingo and Enracha customers, the benefits of which would start to accrue immediately;
• identified cost savings of at least £100 million (net of dis-synergies) per annum; and
• the re-rating potential of the Enlarged Group which is supported by recent precedent transactions in the gaming sector, and expectations of enhanced top-line growth from revenue synergies.
Despite all of those words, William Hill once again turned down the deal. In a statement, the company said:
Having reviewed the Revised Proposal with its financial advisers, Citi and Barclays, the Board of William Hill has unanimously rejected the Revised Proposal as it continues to substantially undervalue William Hill and as such the Board continues to see no merit in engaging with the Consortium.
The Board of William Hill continues to believe that the Revised Proposal is highly opportunistic and does not reflect the inherent value of the Group. 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.
“This revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed,” William Hill Chairman Gareth Davis said, echoing his sentiments from last week. “Therefore, the Board sees no merit in engaging. As we have said before, this is highly opportunistic and complex and does not enhance the strategic positioning of William Hill. The Board continues to believe we have a strong team to deliver superior value to our shareholders and trading at the start of the second half gives us renewed confidence in our stand-alone strategy.”
After the rejection of the initial proposal, 888 owner Eyal Shaked took to Twitter to complain, saying, “Pure ego made #WilliamHill reject #Rank and #888 £3.16bn bid and that will be their downfall.”
We’ll see if he has anything to say now that William Hill has turned down another quarter of a billion pounds.