Betting share prices slip on William Hill break-up plans

A William Hill takeover will likely see it broken up.

Betting stocks — including that of Paddy Power owner, Flutter Entertainment — fell after UK gambling group William Hill accepted a takeover offer worth less than anticipated and which is likely to see its business broken up.

Flutter shares dipped by nearly 1.5%, while those of Ladbrokes' owner, GVC, tumbled by almost 4%.

William Hill has chosen to sell itself to a rival rather than private equity, yet the £2.9bn (€3.2bn) deal could still end  in a break-up of the company.

#Caesars (@CaesarsEnt) reaches agreement on #WilliamHill (@WilliamHill) takeover from @SBCGamingNews https://t.co/ASRNNY6rN7

— Turnpike Sports® (@TurnpikeSports) September 30, 2020

Reno-based Caesar's Entertainment’s takeover bid was accepted by William Hill’s board, strengthening its position to expand in the lucrative business of online gaming in the US.

If its bid is successful, Caesar's said its focus would be on William Hill’s US assets and it would "seek suitable partners or owners" for the other businesses, such as the UK.

The British company has been focused on its US operations since the Supreme Court legalised sports betting in 2018, while its older markets have suffered from tighter regulation.

Caesar's said the joint venture "needs to be broadened in scope, in order to fully maximise the opportunity in the sports betting and gaming sector"

William Hill’s statement looks to have shut out a rival bid from buyout firm, Apollo Global Management. From William Hill’s perspective, a deal with Caesar's may have been all but inevitable: The companies already operate a joint venture in the US, and Caesar's said on Monday it could terminate aspects of it, if Apollo’s approach prevailed.

Caesar's said the joint venture "needs to be broadened in scope, in order to fully maximise the opportunity in the sports betting and gaming sector". 

It estimates the US sports and online betting market could be worth $35bn.

Analysts estimated William Hill's non-US assets could fetch between $2bn and $4.5bn. Caesar's would put that money toward repaying its debt financing, it said.

Caesar's cash offer of 272p per William Hill share is seen as undervaluing the UK company and needs the approval of 75% of its shareholders.

The fast-emerging US betting market is already crowded with competition. Flutter sees the US as being its single-biggest growth opportunity, and has targeted a presence in nine states by the end of this year. At the start of last year, it only had a presence in the New Jersey market. Flutter is confident of turning a profit in each state in the US roughly two years after entry.

Flutter recently completed the mega takeover of North American online gambling giant, Stars, creating the world’s largest gambling business in the process. Elsewhere, basketball legend Michael Jordan has taken an equity stake in, and a seat on the board of, DraftKings, Flutter’s main rival in the US fantasy sports-betting market.

Meanwhile, online gambling firm, 888 Holdings, has upped its profit forecasts and declared a special dividend, as sporting events resume and people confined to their homes have shifted to internet betting.

 — additional reporting, Bloomberg and Reuters