Caesars has warned William Hill to take a $3.7 billion acquisition offer or leave the existing relationship entirely if it is ambivalent.
Last month, the UK-based bookmaker announced it had received competing offers from two rival companies, Caesars and Apollo Global Management. However, Caesars seems to be in an advantageous position due to its existing partnership. Currently, William Hill manages all Caesars sports betting operations, offering a stable revenue flow for the British company. It also provides market access in various states, particularly the Caesars brand, for any online gaming product.
However, Apollo has joined the high-profile acquisition expressing an active interest in taking over William Hill. This may perturb Caesars’ operators leading them to consider terminating the US joint venture with the London-based sportsbook if it is acquired by Apollo.
Strategic Rationale for Caesars and William Hill
Caesars stated that its offer was high enough that the William Hill board could recommend it to shareholders. The US-based operator said, “We believe that taking over William Hill would improve the customer experience and profitability as compared to our current joint venture with the William Hill in the US, which is complex and undervalued by the industry to the detriment of our existing stakeholders.”
As per the prospectus, the deal includes:
- The chance for William Hill to cross-sell to Caesars rewards database
- Unified customer experience across their sportsbook and internet casino platforms
- Improved attractiveness as a potential partner for media entities
- Broader market access
The US Business is the Prize
Caesars stated that it would sell off the British sportsbook’s non-US assets. The company said, “Our strategic focus remains on the opportunities in the US market for now.”
Furthermore, Caesars is issuing 30 million new shares worth roughly $1.7 billion in order to finance the acquisition. The US gambling giant will raise the remaining $2 billion through debt secured against the British company’s non-US business.
William Hill shares plunged 10% to 280p in September following a 40% rise when the offer was first revealed. The CZR offer comes in at 272p per share.
The possible takeover with a huge transaction involved also features the market perceptions of sports betting entities either side of the Atlantic. William Hill is still trading at 2.2x, even after the CZR offer compared to DraftKings, with 34x its 2020 revenue expectations.
While analyzing the situation, Harry Barnick said, “With regulation being determined on a state-by-state basis, Caesar’s huge existing footprint in the US will put WH in a strong position to capitalize on the changing market landscape.”