Caesars Entertainment, the Las Vegas casino company, has made a deal to take over William Hill for $3.75 billion.
There were two companies making a bid for the bookmakers – Caesars Entertainment and Apollo, a US private equity firm.
However, Caesars bid got a ‘minded to recommend’ nod from the board at William Hill.
Caesars has a joint venture currently with William Hill in the US. This is a Nevada based betting operation, bought for $50 million in 2012, of which Caesars owns 20%.
Roger Devlin, chairman of William Hill, said: “The William Hill board believes this is the best option for William Hill at an attractive price for shareholders.”
Caesars chief executive Tom Reeg said: “The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect.”
Caesars is paying 272 pence a share at an 80.7 per cent premium to the average price of the shares over the past three months but slightly lower than the closing price on Tuesday. Analysts said they believed William Hill was worth “significantly more”.
Greg Johnson, an analyst at Shore Capital, said the price was a “sell out” but that Caesars’ could “effectively snooker” rival bidders by threatening to pull out of its joint venture with William Hill in the US.
The takeover will give Caesars access to the burgeoning US sports betting market. The US betting market size is anywhere between $10bn and $40bn, though the pandemic surge in online betting due to the lockdown might have pushed it up. Caesars also owns various casinos in the UK.
William Hills’ US operations will be totally integrated into the Caesars brand and the UK company will be delisted from the UK stock exchange. Caesars plan to hive off William Hill’s UK and European branch networks as stringent regulatory norms have created an unhealthy business atmosphere for the betting companies. In August, William Hill closed 119 branches in the UK.
Sports betting was illegal in the US but a Supreme Court decision in 2018 overturned the federal ban and unleashed a new interest in the US in this gambling sports.
The US is a vast untapped market and especially in these crisis times of the Pandemic, it has become a sort of lifeline for companies in the business.
The announcement of the takeover has driven Caesars shares in value from $6 after the March arrival of the pandemic to almost $54 at closing on Tuesday.
Caesars predicts that it will make between $600m and $700m in revenues next year in online and sports betting.
Roger Devlin, William Hill’s chairman, said the offer was at “an attractive price for shareholders” but added that it reflected the “risk and significant investment required to maximize the US opportunity, given intense competition in the US and the potential for regulatory disruption in the UK and Europe”.
He said it would be “very much business as usual” for William Hill workers for now. William Hill has 11,500 employees, of which 800 work in the US.
Tom Reeg, the chief executive of Caesars, said: “William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast-growing US sports betting and online market.”