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William Hill (WMH) was the first of the listed UK bookmakers to set up in the US and, at the time, it seemed a bold move. It was back in 2012 that it made its foray across the Atlantic and up against tough competition, critics wondered whether the UK bookie had bitten off more than it could chew. The very real fear was that the UK entrant would be chased out of town by large, powerful already-established betting groups like Stars and GVC which had lucrative partnerships with Fox Sports and MGM, respectively, already in place.
The idea that a UK bookmaker could set up shop against these sorts of players and survive seemed unlikely to many.
Yet, opinions started to change when William Hill, facing increasingly stringent regulation in the UK, decided to focus on its fledgling, but promising US foothold. As UK regulators clamped down on the betting industry, slashing the maximum stake on fixed-odds betting machines from £100 to £2 and prompting William Hill to earmark 700 shops for closure, its US move, instead of bold, seemed like a smart bet.
It all started when William Hill bought Brandywine Bookmaking business in Nevada for $50 million in 2012. With Brandywine’s Joe Asher at the helm of William Hill US and an increasingly negative regulatory outlook for the betting industry in William Hill’s UK heartland, the stage was set for a shift in focus to the US.
By the time sports betting was legalised in the US in May 2018 William Hill already had a physical presence in 10 of the 13 states where sports betting is permitted, putting it well ahead of any UK competition.
The expansion of William Hill US has since been boosted by a partnership with casino operator Eldorado, which took a 20% stake in return for making the company its exclusive sports betting provider. And that deal was made even sweeter by Eldorado’s $17.3 billion acquisition of rival Caesars in June 2019, giving William Hill immediate access to 34 more casinos.
Fast forward a year and a bit and the latest deal is likely to see William Hill selling sports betting to Caesars’ 60 million loyalty scheme members and operating under the Caesars name, which is far more widely recognised in the US.
Estimates of the size of the US betting market vary from $10 billion to $40 billion in annual revenues. Factor in the surge in online gambling during lockdown and 2020/21 could see a pretty decent turnaround for the FTSE 250 company that reported a £722 million loss in 2018.
US casino giant Caesars Entertainment has moved a step closer to acquiring gambling company William Hill, after its board of directors agreed to Caesars' £2.9 billion takeover bid.
William Hill has agreed to accept Caesars' cash offer of 272p per share, a 58% premium to its closing price on 1 September, the day it was first approached by Caesars.
The deal still needs to be approved by at least 75% of shareholders at a general meeting, and comes after two rival bids by the US private equity group Apollo were turned down.
Chairman Roger Devlin said, 'The William Hill board believes this is the best option for William Hill at an attractive price for shareholders.
'It recognises the significant progress the William Hill group has made over the last 18 months, as well as the risk and significant investment required to maximise the US opportunity given intense competition in the US and the potential for regulatory disruption in the UK and Europe.'
Analysts argue that accurately valuing William Hill, which to date employs 11,500 people, of whom 800 work in the US, is extremely challenging, at a time of such flux and uncertainty. So Wednesday’s trading update will be closely watched.
Analysts at Berenberg downgraded William Hill to hold from buy after the group accepted the takeover bid from Caesar’s, saying the 272p a share bid price was “materially above” its target price, but still below its expectations of between 282p and 356p.
Prior to this latest flurry of takeover activity. Brokers, while positive on the stock, had mixed views on where William Hill’s share price would go. Goldman Sachs remains neutral and has cut its price target from 139p to 137p.
Jefferies International was a buyer of the stock and raised its price target to 330p, from 305p. Analysts there though later came out and said its most bullish scenario could see the shares top 460p, however at its most bearish it could see them slump to just 80p; although that was on the basis of no bid being forthcoming.
JP Morgan Cazenove upgraded its investment rating on William Hill to overweight and raised its price target from 200p to 220p. Deutsche Bank retains its buy rating and has raised its price target to 160p from 140p. William Hill’s shares are currently trading around 275p.
More on William Hill (WMH)
Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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