William Hill and Caesars Entertainment Corp. held merger talks last fall, the Sunday Times reports. A deal would have seen the US casino giant take over the British bookmaker to create a £6 billion gambling powerhouse with formidable geographical presence and an excellent position in the newly liberalized US sports betting market.
Sources familiar with last fall’s takeover talks told the Sunday Times that the two companies held detailed discussions about “a cash-and-shares deal.” However, those discussions were eventually aborted over price.
British bookmakers have set their eyes on expansion in the US, where the Supreme Court struck down last May a federal ban on sports betting, thus paving the way for the legalization of the practice in multiple states.
In their domestic market, UK gambling operators are facing a massive crackdown on the highly controversial fixed-odds betting terminals and other regulatory pressures. The UK Government implemented on April 1 a reduction of the maximum bet on the gaming machines to just £2 from £100. The move will hit operators’ profitability significantly and is expected to result in betting shop closures and job losses.
William Hill is the operator of the second largest chain of betting shops in the UK. The company has already been struggling with ailing profitability, as its digital operation failed to pick up the momentum that its competitors in the field did gain, and the FOBTs clampdown would only make things worse.
William Hill shares have plummeted since the company announced a pre-tax loss of £722 million for 2018, down from a £146.5 million profit in the prior year.
William Hill’s Consolidation Attempts
News of William Hill and Caesars previously engaging in merger talks is expected to once again spark speculation that the British bookmaker could be a takeover target. Its biggest rivals have already taken part in the ongoing consolidation in the field, striking multi-billion deals in hopes to offset the losses that they will imminently suffer from the FOBTs crackdown and to mitigate the effects of the ever-growing regulatory pressure.
GVC Holdings bought last year Ladbrokes Coral, the owner of the largest number of betting shops in the UK, in a £3-plus-billion deal. Ladbrokes Coral itself was the result of a multi-billion merger between Ladbrokes and Gala Coral in 2016. The same year saw two more large-scale deals – GVC’s takeover of bwin.party digital entertainment. and the merger of Paddy Power and Betfair (the combined entity now operates as Flutter Entertainment, following a recent rebrand).
William Hill has itself engaged in talks with several potential suitors over the past several years. In August 2016, the company rejected a joint bid from 888 Holdings and The Rank Group. A few months later, it also rejected a £5-billion merger proposal from Canadian gambling giant Amaya (now The Stars Group). Both potential deals failed due to pressure from William Hill’s largest shareholders, who said back then that the company could not engage in a deal based on “risk, debt, and hope.”
Earlier this year, William Hill purchased online gambling group Mr Green & co AB (MRG) for £242 million. The deal is hoped to help William Hill improve its digital performance. It has also secured the British bookmaker with a ready-made EU base once the UK leaves the European Union. William Hill is currently based in Gibraltar, while MRG is headquartered in Malta.
Sources said that William Hill’s CEO, Philip Bowcock “would still quite like to sell the business because he’s set some pretty big targets for what they’re going to do in the US.”
Caesars and Eldorado Merger Talks
Caesars has itself been making the headlines recently with its potential participation in the consolidation in the field. The company’s largest stockholder, New York activist investor Carl Icahn, has been pressing it to sell itself or merge with another business as he believes this is the best path forward.
Last fall, Caesars declined an offer from Texas businessman Tilman Fertitta to combine its operations with those of his Golden Nugget casino chain. In March, news emerged that the company was in early merger talks with another Nevada-based gaming and hospitality company – Eldorado Resorts.
Sources said back than that Caesars has given Eldorado access to financial data so that the latter can conduct due diligence. It was reported last month that Eldorado’s CEO, Tom Reeg, has been looking for ways to slash Caesars’ costs by at least $500 million before moving forward with a potential merger.
Caesars operates 53 gaming and non-gaming resorts on four continents, while Eldorado runs 26 properties across 12 US states.
Deutsche Bank analyst Carlo Santarelli has recently expressed optimism about a Caesars/Eldorado combination, saying that:
We believe the likelihood for an ERI/CZR pairing has increased and we believe this transaction would be a net positive for ERI, CZR, and the gaming group more broadly, given the valuation implications and broader halo of a busy (mergers and acquisitions) environment.
Here it is important to note that Eldorado owns 20% of William Hill’s US business, which means that a merger between Eldorado and Caesars would also mean William Hill and Caesars somewhat coming together.
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