Britain’s largest bookmaker William Hill Plc recently announced that it has rejected a buyout bid from 888 Holdings and Rank Group saying that the proposal undervalued the company.
The 3.2 billion-pound ($4.2 billion) cash-and- stock offer was made last week. The bid offered 364 pence a share out of which 45 percent would be in form of shares in a new company which would be created for the acquisition. William Hill said that the offer was a premium of 16 percent to the share price last month and termed it a very low offer.
In a statement, Chairman Gareth Davis said,
This conditional proposal substantially undervalues William Hill, is highly opportunistic and does not reflect the inherent value of the business.
Davis added that the deal posed a substantial risk to the company’s shareholders since after the merger, the new company would be left with a debt of 2.2 billion pounds which had to be raised to fund the cash portion of the deal. William Hill shareholders would have a stake of 44.6 percent in the new merged entity, which is expected to have an annual revenue exceeding 2.8 billion pounds.
The buyout bid increases the pressure on the bookmaker after the exit of Chief Executive Officer James Henderson last month. The company is struggling to show growth as the online betting market continues to pose serious competition. The company attempted an entry into the online betting space with the launch of a new web platform and mobile application last year but ran into trouble which impacted both revenue and growth. William Hill cut profit guidance in March for its second quarter results.
Alistair Ross, an investment analyst at Investec in London said that he expected the bidders to come back with another offer but suggested that they may not have the financial means to offer a price that would attract William Hill. Ross estimates that the bid would need to be in the range of 400 pence a share for it to succeed.
The merger would create a behemoth that would become Britain’s largest bookkeeper overtaking William Hill. The betting industry has been seeing increasing consolidation with multiple recent deals that include merger of rivals Ladbrokes Plc and Coral and the takeover of Betfair Group Plc by Paddy Power Plc.
888 and Rank have said that the merger would offer substantial synergies in cost and operations as a result of merging online and offline operations of the different entities. 888 Holdings and Rank Group have not yet released a statement on William Hill’s offer rejection.
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