William Hill PLC ADR fka WIMHY

[JohnCM]

William Hill Stock Soars on Takeover Offers From Apollo and Caesars. A Bidding War Looms.

Sept. 25, 2020
By Jack Denton
The Barron's Daily

William Hill announced that it has received potential takeover bids from Caesars Entertainment and Apollo Management.

British gambling company William Hill said on Friday it has received separate takeover bids from buyout firm Apollo Management and Caesars Entertainment as the fight to capture the U.S. sports betting market intensified.

William Hill stock surged 43% in London trading, as investors welcomed the prospect of a bidding war and a potential takeover. The news also lifted other British betting companies, with GVC more than 17% higher, 888 Holdings 12% up, and Flutter Entertainment up more than 6%.

The back story. FTSE 250 constituent William Hill is already Caesars’ sports betting partner and operator. Last week, it was announced that media giant ESPN had signed co-exclusive deals with Caesars and DraftKings, which made William Hill ESPN’s official odds supplier across its platforms. William Hill also has an exclusive media partnership with CBS Sports.

While sports betting is a mature market in the U.K.—having been legal since the 1960s—the American market is new and booming. A Supreme Court ruling in 2018 paved the way for legal sports betting in the country, and William Hill has since emerged as one of the market leaders.

As it expands into the U.S. market, William Hill has been forced to transform its British business, merging its online and retail divisions. In August the company announced that 119 shops closed due to the Covid-19 outbreak wouldn’t reopen. Regulatory woes, including a £2 stake limit on certain betting terminals, have also hit performance at the company’s physical U.K. stores.

What’s new. William Hill’s board said on Friday afternoon that it has received separate cash proposals from buyout firm Apollo and U.S. casino operator Caesars Entertainment. William Hill said the first written proposal came from Apollo on Aug. 27, followed by a further proposal from Apollo and proposals from Caesars. Discussions between William Hill and the two parties are ongoing, the London-listed company said.

The statement was released without the permission of either Apollo or Caesars, and came shortly after Bloomberg first reported that Apollo was exploring an acquisition of the company. Apollo declined to comment on the announcement.

This is the starting pistol in the race to make a bid for William Hill. Under British takeover rules, Apollo and Caesars have until end-of-day Oct. 23 to announce their firm intention to either make a bid or not make a bid for the company.

Looking ahead. It was only a matter of time before big American money targeted William Hill, which has a market cap of £2.28 billion ($2.9 billion). The company is one of the largest gambling companies in the world and is serious about capitalizing on the ripe U.S. market. Its experience in the U.K. and standing in the U.S. already makes it a highly attractive proposition for both buyers.

Apollo’s offer isn’t a shock—American private equity has been targeting British companies since the coronavirus pandemic sank share prices in the spring. But depending on the terms, Caesars may be better positioned to take the reins because it is already joined with William Hill through a partnership and has built its business on the gambling meccas of Nevada.

Analysts marked William Hill stock as underpriced in August and September—it is certainly less so now, but that doesn’t mean it isn’t a good gambit for investors.